The most important event of the past several hours was certainly the occurrence of Theresa May, the British Prime Minister, who presented preliminary plan for exiting UK from the European Union. Fulfilled were investors’ concerns about hard approach to the negotiations, but did not meet expectations as to the market movements. Polish zloty (PLN) after yesterday strengthening today goes back to the beginning of the session in anticipation for labor market data.
Theresa May, according to previous press reports announced that the United Kingdom will be hard to negotiate their way out of the European Union. This means that the British Prime Minister is willing to give up the fight for access to the single market to regain full control over its borders. This is obviously a bad signal to the British economy and for companies resident in British cities. On the other hand, May indicated that a final agreement will be put to a vote in both houses of parliament, which really means opening way to negotiations and a possible compromise. In case of negative agreement introduced by the government, the British parliament will be able to easily reject in voting, which again can cause speculation about whether the Brexit in general may happen, on the other hand can leave uncertainty, which adversely will affect the UK assets.
Yesterday’s mentioning of possibility of voting in the parliament the agreement within UK and EU has led to the biggest rally of the British pound since 2008. Yesterday move on pair GBPUSD was up 400 pips, which is a great value for the currency pairs of the G10. Pound also significantly strengthened against the Polish zloty.
In case of the US dollar we had a clear weakness yesterday, which resulted, among others from the last words in an interview with the Wall Street Journal, which stated that he is not in favor of introducing border tax, due to its complexity. On the other hand, such a solution has strong support in the Republican Party and could lead to a further strengthening of the US dollar. Trump did not stop, however, at these words, saying that a strong dollar hinders the competitiveness of the US economy, especially towards China.
The Polish zloty strengthened significantly yesterday against the European currency and the US dollar. Today partly these movements are reduced, but still there is no panic on the Polish zloty. Today we will know the data from the Polish economy on wages and employment. At 09.00 per euro paid 4.3636 PLN, the dollar: 4.0801 PLN per pound: 5.0287 PLN and for the franc: 4.0693 PLN
Michael Stajniak Analyst of Financial Markets XTB
