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Afternoon analysis 07.03.2017

7 Mar 2017 15:28|Bartosz Grejner

The euro zone’s economic growth is consistent with both the expectations and the initial data. The American trade balance for January was the highest in approximately five years. The zloty has worked-off a portion of its losses.

Euro zone and American trade balance

Eurostat informed that the euro zone’s economic growth for the fourth quarter increased 1.7% YoY and 0.4% QoQ. This reading was consistent the initial data, as well as with the market consensus. The EU (28 countries) GDP growth was at the level of 1.9% YoY and 0.5% QoQ.

Only Greece quoted the GDP decrease (by 1.2% YoY). In Finland, this index remained unchanged in the Year over Year interpretation. The largest GDP growth for the fourth quarter was quoted in Estonia (1.9%) and in Poland (1.7%). However, this data had a limited impact on the euro, due to the mild policy from the ECB, as well as the sentiment related to the French presidential elections.

The Bureau of Economic Analysis informed that the American trade balance was at the level of negative 48.5 billion dollars. This is the largest trade balance deficit since April 2012. However, this reading was consistent with the market consensus. Moreover, the EUR/USD was pushed to the level of 1.056 and the USD/JPY went above 114. As for the GBP/USD, this paur was near the 1.22 level, due to the weaker pound. This caused the dollar’s index approached its two-month maximum (102.3 points).

Zloty is working-off its losses

After 13.00, the zloty started to strengthen. The EUR/PLN decreased from 4.314 to 4.303. However, this pair returned to the area of 4.31 shortly before 15.00. Nevertheless, the PLN/HUF has returned to the area of its yesterday’s level. Moreover, the CHF/PLN went towards its three-month minimum.

Tomorrow’s MPC meeting may be negative for the zloty. Moreover, the stronger dollar, as well as increasing profitability of the American treasury bonds can cause negative reactions on the Polish currency as well. The MPC will most likely leave interest rates unchanged. Moreover, tomorrow’s announcement may be very similar to the previous one. Taking into consideration increasing chances for faster rate hikes in the USA, this may deteriorate the zloty’s condition.

Tomorrow’s events

At 9.00, Destatis will publish the data regarding the German industrial production for January. The market consensus is at the level of 2.5% MoM. This index is relatively volaitle in the Month over Month interpretation. Moreover, today’s data regarding the industrial orders appeared to be disappointing (negative 7.4% MoM vs negative 2.5% MoM). Theoretically, a change in the orders index should also indicate a change in the production index. However, this relation has not always been accurate. The industrial orders index has always been more volatile than the industrial production index.

At approximately 12.00, the National Bank of Poland will publish its decision regarding interest rates. Moreover, at 16.00 we will know the announcement regarding this decision from the Monetary Policy Council and the MPC press conference will occur. However, we don’t expect this to be significantly inconsistent with last month’s announcement, in which the Council indicated that higher inflation growth was caused by an increase in the raw material prices. Moreover, during the previous press conference, Adam Glapiński (the MPC chair) said that interest rates are most likely to remain unchanged until the end of 2017. Therefore, the zloty’s reaction to this announcement should be limited.

At 14.15, the ADP will present the data regarding employment in the American non-agricultural sector for February. In January, this index was better than expected (246k vs 165k). The largest increase was quoted by mid-market companies (102k). Moreover, employment in small business increased by approximately 30k. However, we need to keep in mind that this data is quite volatile in the Month over Month interpretation. Therefore, we shouldn’t expect a strong reaction on the dollar in the case of the reading within the range of 150k-250k. The market consensus is currently at the level of 190k.

7 Mar 2017 15:28|Bartosz Grejner

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:

7 Mar 2017 12:22

Daily analysis 07.03.2017

6 Mar 2017 15:24

Afternoon analysis 06.03.2017

6 Mar 2017 12:30

Daily analysis 06.03.2017

3 Mar 2017 14:55

Afternoon analysis 03.03.2017

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