Zloty remains stable (Afternoon analysis 24.12.2018)

Events in the USA may deepen the drops on the main markets. Oil falls below 45 USD/bbl, and the dollar remains under supply pressure. These events make the zloty appreciate slightly in relation to the main currencies.

EUR/USD again above 1.14

A strongly reduced liquidity characterises the holiday trading on the market. No significant macroeconomic publications are planned for this period, and most of the main markets are closed (today's shortened sessions). Usually, this results in small changes in the markets. However, in the event of increased uncertainty, potential changes may be relatively large, thanks to the limited liquidity mentioned above.

Such a situation is happening today. The market was "scared" at the end of last week, when the main indexes on the US market closed with drops of 2-3 per cent, deepening the last several months' bottoms. The list of problems troubling the market is not short. Concerns about economic growth were accompanied by renewed pressure from President Donald Trump on the Fed. Reports about the dismissal of its head, later denied by the Secretary of Treasury Steve Mnuchin, as well as assurances of the aforementioned US Secretary of sufficient liquidity in the financial sector.

The increased uncertainty was visible mainly in futures contracts on the US indexes. In the afternoon they were still gaining nearly 1 per cent, and two hours later they were recording over 0.5 per cent decline. This led to lower oil prices. The brent type fell below 45 USD, setting the new lowest level since July 2017.

However, these factors had a limited impact on the currency market. Since the beginning of the session, the US currency has gradually depreciated. The main currency pair, the euro/dollar, rose again above the 1.14 handle. However, it seems that a further deterioration in the market sentiment (if the recent downturn on the US markets deepens) may help the dollar to pare the incurred losses.

In the light of these events, the zloty remained stable. Theoretically, depreciation on the equity market and a global increase in risk aversion are a negative scenario for the zloty. However, the Polish currency is supported by low oil prices (Poland is a net importer of this raw material), currently weaker dollar, as well as good macroeconomic data that has recently been coming from within the country. In relation to the main currencies, the zloty has even slightly gained today, although the fluctuation range remained limited. A positive effect on the zloty basket was achieved by the supply pressure on the dollar today. The USD/PLN exchange rate fell back to around 3.75 and the EUR/PLN to 4.28. If we do not observe a significant strengthening of the dollar (which could weaken the zloty basket a little), the Polish currency should remain stable during the holiday season.