Afternoon analysis 29.09.2015

, author:

Marcin Lipka

Lower inflation from Germany may affect the eurozone inflation tomorrow. Solid data from the US. Optimistic government budget projection for the GDP growth and relatively high deficit.

Inflation and US data

During most of today's session the EUR/USD stayed above the 1.1200 level. Despite the fact that some stock market calmness pushed the most heavily traded pair lower there is still some “risk off” sentiment in the rate.

In the afternoon, some pressure on the euro might have come from German inflation data following some lower readings also from Spain. Both figures were lower than market expectations and there is a high probability that the consumer price index from the eurozone can also be below 0.0% y/y.

The marker, however, should be more focused on the core reading. The recent euro strength and further commodities slide should not significantly deviate prices excluding food and energy. Further, after the most recent Draghi speech in the European Parliament the market should be more resistant to some swift suggestions on more QE. As a result, even if Wednesday's headline inflation data turn out to be lower, it does not have to significantly weaken the euro.

Solid readings were published in the US. The Conference Board consumer index turned out to be especially high. The headline reading rose to 103 points while economists expected a fall from 101.3 to 96.8.

If we look at the measure broader, we can see that the current consumer condition rose to 121.1 points, which is the highest level in 8 years. It confirms the overall solid US economy condition especially on the job market. The future for US consumers does not look that bright because the leading indicator dropped slightly. However, it may be a result of some stock market slide and pessimistic reports from the global economy. Overall, the data was good and was reflected in some appreciation of the S&P 500. If the US index manages to cut most of Monday's losses, the EUR/USD should fall below the 1.12 mark.

The zloty remains weak

The zloty remains relatively weak, even though some solid US reports managed to push the EUR/PLN below 4.24 shortly after 16.00 CET. Today, the government accepted the budget plan for 2016 with a GDP growth of 3.8% and a deficit at 2.8% of the GDP.

Overall, the government assumes quite solid growth taking into account the economic projections around the world. It is also worth noting that the actualized in April “Convergence Plan” published by the “Finance Ministry” projected a budget deficit of 2.3% of the GDP and growth at 3.8% for 2016. So, the growth remained unchanged and the deficit was pushed higher by 0.5 of a percentage point, which is a significant change in the current environment.

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This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without the written permission from Sp. z o.o is prohibited.

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