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Afternoon analysis 03.03.2017

3 Mar 2017 14:55|Marcin Lipka

The euro is clearly stronger due to a survey, which suggested that Emmanuel Marcon would win in the first round of the French presidential elections. The pound is a victim of the stronger dollar. Significant reading of the American services sector ISM. The EUR/PLN returns to 4.30 and the USD/PLN goes further from 4.10.

Interesting situation

According to Odox, Emmanuel Marcon may win against Marine Le Pen alreadu in the first round of the French presidential elections. Reuters announced that Odox didn’t conduct a simulation of the second round. However, taking into consideration that the advantage of both Marcon and Filon over Le Pen was near 20 percentage points in the final round, this survey would most likely indicate a similar result.

One may wonder, why the EUR/USD has increased approximately 50 pips, if that only was one survey. However, this reaction is partially justified. Lower chances for Le Pen’s victory reduce the risk of France leaving the euro zone. Moreover, this also allows to decrease pressure on the profitability of the German debt. Due to the Odox survey, the profitability of the German two-year treasury bonds increased by 3 base case points and reduced their distance from their American equivalent.

Strengthening of the euro, as well as a relatively strong dollar, caused an interesting situation. Today, the pound was under pressure of negative data from the United Kingdom. Additionally, David Davis confirmed that the UK will activate the Article 50 in March. This means that the Brexit procedure will officially begin.

The pound remained weaker against the dollar, due to the market expectations regarding rate hikes. Moreover, the British currency is also wore-off against the euro, due to a survey regardingthe French elections. The general weakness of the pound caused the GBP/PLN to go below the 4.98 level.

American ISM and stronger zloty

Today, we received the American services sector ISM. Previously, this index was at the level of 56.5 points and its subindexes (production and new orders) remained near the level of 60 points. If the new reading remains at a similar level, investors will quickly focus on the employment component.

According to the American Labor Department, the services sector hires 103 million employees. The public administration sector hires 22 million people, the industrial sector hires 12 million people and the building sector hires approximately 7 million people. This clearly shows that employment in the services sector is the most significant for the condition of the entire American labor market. Therefore, this ISM component may be the most crucial element of today’s report.

In January, this component reached the level of 54.7 points. If today’s data is by 1-2 points above this level, this may strengthen the dollar. However, if this subindex goes below 53 points, the dollar may find itself in an unfavorable position before testimonies from the FOMC representatives.

The zloty has been doing relatively well this afternoon. This was clearly caused by the previously mentioned news from France. The EUR/PLN returned to the 4.30 level. Moreover, due to the zloty’s strength, as well as to an increase in the EUR/USD, the dollar went clearly away from the level of 4.10 PLN.


3 Mar 2017 14:55|Marcin Lipka

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 acknowledgement of the source is prohibited.

See also:

3 Mar 2017 12:22

Daily analysis 03.03.2017

2 Mar 2017 15:28

Afternoon analysis 02.03.2017

2 Mar 2017 12:15

Daily analysis 02.03.2017

1 Mar 2017 15:34

Afternoon analysis 01.03.2017

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