Daily analysis 25.08.2017

25.08.2017 12:32|Bartosz Grejner

In August, German sentiment has remained close to the historic index according to Ifo. German GDP growth rate is consistent with the initial reading. The zloty maintained yesterday's appreciation.

The most important macro data (CET - Central European Time). Surveys of macro data are based on information from Bloomberg unless noted otherwise.

  • 2.30 p.m.: July's orders for durable goods in the USA (estimates: -6.0% MOM, previously: +6.5% MOM),
  • 4.00 p.m.: Speech by Janet Yellen at the Jackson Hole Conference (USA), President of the Federal Reserve,
  • 9.00 p.m.: Speech by Mario Draghi at the Jackson Hole Conference (USA), President of the European Central Bank.

German companies are optimistic

Today, the Federal Statistical Office (Destatis) released data on the GDP of Europe's largest economy in Q2. It turned out to be in line with both the expectations and the preliminary reading from the 15th of August. Compared to the first quarter, the GDP grew at a rate of 0.6%. Data has also been revised upward for the first three months of this year as economic growth was 0.7% in the first quarter, compared with the previously reported 0.6%.

However, today's more detailed data has shown that although exports increased by 0.7% compared to the previous quarter, imports increased by 1.7%. The negative trade balance has made its contribution to quarterly economic growth negative and amounted to -0.3 percentage points.

In turn, continued strong growth has been shown by household spending. Consumption increased by 0.8% compared to Q1 and its contribution to GDP growth amounted to 0.6 percentage points in Q2. This is the most growth in the past five quarters (when it was also 0.6 percentage points).

Positive data regarding the German economy was presented by Ifo Institute. August's sentiment index of entrepreneurs fell only by 0.1 points from last month’s historical highs (116 pts). Although, the reading at 115 pts was expected. This nominal decrease was due to a slight decline in the current evaluation of the business situation (from 125.5 to 124.6 points).

German enterprises' expectations in the term of an increased condition in the nearest future have reached historical records as the expectations index increased by 0.6 points to 107.9 points, although it was expected to drop by 0.5 points. The better evaluation of business’s perspectives have been somewhat in contrast to August's assessment of consumers and financial sector experts - they examined the current situation as better, and the future one as worse (according to Sentix and Zew Institute).

Recent news from Germany has shown that the economy has remained in really good shape and will likely be the driving force of the eurozone. Today's reaction from the euro, however, has been limited. After the publication of the Ifo index, the euro exchange rate against the dollar (EUR/USD) rose from 1.178 to approx. 1.180 around midday.

However, it was in the narrow range of fluctuations we observed this week. The pound sterling has also been stable, although the British currency has remained under pressure. The GBP/USD pair was just above the 1.28 boundary - close to the lowest price for two months.

The zloty held yesterday's gains

Yesterday, we observed the Polish currency's appreciation. Although it was not continued today by midday, yesterday's gains were maintained. By midday, the exchange rates against the main currency pairs remained practically unchanged at the end of yesterday's trading day.

The aforementioned very good condition of the German economy has also been good news for Poland and the zloty - Germany is Poland’s biggest trading partner and its economy also interacts with its eastern neighbour.

The most important events of today's calendar will most likely be Janet Yellen’s speech (President of the US Federal Reserve) and later, Mario Draghi (President of the European Central Bank). While both of these events may cause increased fluctuations in the foreign exchange market (especially in case of the euro and dollar), the chances of significant exchange rate movements seem to be limited.

The probability of Mario Draghi surprising the audience by giving information about the QE tapering is relatively small given the ECB's fears of a too-high euro exchange rate. A slightly better chance of hawkish comments can be assigned to Janet Yellen's speech, although the recent US economic data hasn’t given her many arguments for this opinion.

 


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