Tuesday marks the second consecutive day of the zloty’s strengthening against major currencies. We can’t say the same for the Mexican peso, Canadian dollar, or Chinese yuan, which have lost ground following Trump’s latest announcement. In the background, a clumsy attempt to change direction on the “edge”.
Revival of the Polish consumer
Today’s retail sales data (constant prices) in Poland returned to positive levels. The year-on-year figure indicated an increase of 1.3%, which is a better result than forecasted (0.7%). Recall that the previous figure was below the line (-3%), which was the only negative result this year. Thus, today’s publication dispelled fears about the poor condition of the Polish consumer, which emerged a month ago. The data is favourable for the domestic economy, hence it did not prevent the local currency from continuing yesterday’s strengthening against the major currencies. Tuesday’s PLN gains are also the effect of local appreciation of the euro on the EUR/USD chart. The EUR/PLN rate looked down on 4.31 PLN before 14:00. At the same time, USD/PLN fell below 4.09 PLN. It’s worth mentioning that this is not the end of important readings from the domestic economy this week. Tomorrow we will get the unemployment rate, on Thursday the Polish GDP, and on Friday the latest publication on consumer inflation.
Tariffs argument for Trump
Yesterday’s hopes for toning down at least some of the radical ideas of Trump’s new economic policy, related to the nomination of Scott Bessent for the position of US Treasury Secretary, were quickly dashed. The new-old US president announced today a plan to impose a 25% tariff on imports from Canada and Mexico. Additionally, he informed that he is considering raising the planned level of tariffs on goods from the Middle Kingdom by 10 percentage points. Interestingly, among the arguments for the planned action was the lack of response from the authorities of the mentioned countries to the smuggling of drugs – including fentanyl – to the US by illegal immigrants. It therefore appears that the narrative of imposing tariffs may appear more often as a negotiation card on many fronts. Nevertheless, the aforementioned words from Trump weakened the Canadian dollar, Mexican peso and Chinese yuan against the US dollar. The biggest movement was visible on the USD/MXN chart, where the rate at its peak rose from 20.3 MXN to 20.7 MXN, a 1.9% movement.
EURUSD above 1.05
In response to Trump’s words, the dollar strengthened not only against the currencies indicated above, but also against the euro. This morning, we once again tested the 1.045 USD level, which is a major support on the EUR/USD chart. After two unsuccessful attempts to break the level, a reaction occurred, which by 14:00 pushed the world’s major currency pair a cent higher. The scale of the rebound and erasing of the morning dollar’s gains shows that there are plenty of players in the market looking for an excuse to change the direction of eurodollar. The trouble is that there’s currently no such excuse. Technically, the EUR/USD pair remains in a strong downward trend. There are voices suggesting a possible stronger than expected rate cut by the ECB, in light of recent weak PMI readings from Europe, which is weighing on the European Union’s currency. Additionally, the chances of a December rate cut in the US by 25 basis points are diminishing. The probability of a single move by the FED a month ago was nearly 75%, but it has not dropped below 60% in a week. Leaving the cost of money in the US at the current level means a stronger USD. Such a context suggests further movement of the eurodollar towards the south. However, remember that tomorrow there are publications about inflation and GDP from the States, which can introduce volatility in the market in case of divergence from forecasts.
Author: Dawid Górny, Currency analyst Walutomat.pl
Source: https://ceo.com.pl/zloty-zyskuje-drugi-dzien-z-rzedu-trump-uderza-clami-w-kanade-meksyk-i-chiny-70034
