Afternoon analysis 20.02.2017

20.02.2017 15:11|Bartosz Grejner

The EUR/PLN is slightly lower. However, this pair remains by 0.05 PLN away from it’s three-month minimum. The dollar has become stronger. The euro is under pressure of the elections in France.

Slight changes on the zloty

The Ministry of Finance published the estimates regarding Poland’s national budget for January 2017. The report states that the budget surplus at the level of 6.7 billion PLN was the highest in the history. The national income increased 20.3% YoY. This includes the tax income (21.3% YoY growth).

The Ministry of Finance also published its estimates regarding the industrial production for February. After a 9% growth in January, the market consensus for the current month is at the level of positive 3%. This is related to the fact that February is shorter.

Today, the zloty’s quotations were relatively calm. The EUR/PLN was pushed from 4.33 to 4.32. However, the zloty was slightly losing against the euro in the following hours and reached the level of 4.325. The zloty’s quotations against both the dollar and the franc were similar. However, the pound gained approximately 0.3% against the zloty.

Stronger dollar

The lack of the American investors was not an obstacle for the dollar to gain value. The EUR/USD went near the level of 1.06. The pair has not been able to exceed this level since Wednesday, because of the market’s anticipation regarding changes in the American tax system. Moreover, the yen stopped its appreciation against the dollar as well and the USD/JPY returned above the level of 113. As a result, the dollar’s index (DXY) was above the level of 101 points.

Additional pressure on the euro might have been caused by a decrease in the German two-year treasury bonds (negaitve 0.85%). This caused an increase in the spread between French and German two-year bonds (85 base case points, the largest in four-and-a-half years). This may also be a reaction to the latest OpinionWay survey, which indicated that the support for Marine Le Pen increased up to 27% (in the first round of the French elections).

Tomorrow’s market

At 9.30, IHS Markit will present the services and the industrial PMI data for Germany. Thirty minutes later, an analogical index for the euro zone will be published. Since February 2016, the industrial sector has been in the upward trend.

The market consensus is at the level of negative 0.4 points for Germany and negative 0.2 points for the euro zone. When it comes to the services sector, the market expects this index to increase up to 53.8 points for the euro zone and up to 53.6 points for Germany. The euro zone has been quoting a systematic increase in the services sector over the past few months, whereas the situation in Germany was quite the opposite.

Nevertheless, the above data will most likely have a minor impact on the euro, due to the mild monetary policy from the European Central Bank.

At 15.45, IHS Markit will publish the services and the industrial PMI for the American economy. Even though this data is less significant for the American economy than its equivalent from the ISM, it may show the tendencies in both sectors. The company activity in both of these sectors has been increasing rapidly since October.

In January, the services PMI reached its highest value since March 2015 (55 points) and the industrial index reached its highest value since November 2015 (55.6 points). If the data is near the consensus, this would translate to an increase in the dollar’s value. However, due to the fact that the ISM indexes are more significant for the American market, this reading’s impact may be limited. Moreover, the market may focus on the minutes from the previous FOMC meeting, which will be published on Wednesday.

 


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