Afternoon analysis 08.05.2017

Volatility on the market after the French presidential election is limited. Positive perspectives for the Polish currency.

Positive sentiments in Europe

The market received yet another piece of positive information for the eurozone, which was the sentix investor trust index. This index was better than expected (27.4 points vs 25 points) and reached its highest level since July 2007. The sentix survey was conducted on a sample group consisting of 1063 investors (including 289 institutions).

Evaluation of the eurozone’s current condition increased for the fifth consecutive time (34.5 points). The future expectations were slightly worse, although this subindex quoted the third consecutive growth (20.5 points). This situation is completely different from the situation in the USA, where the sentix index decreased for the second consecutive time.

Destatis presented the data regarding new orders in the German industrial sector for March. This index increased 1% MoM, which was consistent with the consensus. However, this result was worse than the result from February (positive 3.5%). This was mainly caused by a decrease in local orders, whereas foreign orders increased.

The currency market was relatively calm today. The French presidential election ended with no surprises. This is most likely to limit the risk of negative reactions in the near future.

The dollar was strengthening today. The EUR/USD went down from 1.10 to 1.093 since the morning. Due to the dollar’s strength against the majority of currencies, the dollar’s index increased up to 99 points. The American currency was also supported by the US two-year treasury bonds (approximately 1.3%).

Zloty remains stable

The zloty has been stable since noon. The result of the French presidential election was not surprising, so it had a minor impact on the zloty. However, it may appear positive for the EM currencies from Central-Eastern Europe. Lower uncertainty in Europe can increase risk appetite. The only obstacle for this scenario, for the time being, is faster monetary tightening in the USA. This could be caused by an improvement in the business cycle, as well as by fiscal changes and cause the capital outflow from the emerging markets, which are considered as more hazardous.

Tomorrow’s events

At 8.00, Destatis will present the data regarding both industrial production and trade balance for Germany. The industrial production went down in December unexpectedly (by 2.4%). However, this index increased in the two months that followed. The market consensus for March is at the level of positive 0.6%.

In December, the trade balance went down from 21.8 billion to 18.3 billion euros, only to increase up to the level of 21 billion within the following two months. Currently, the market expects a slight depreciation of this index to the level of 19.8 billion euros. This is because of a larger increase in import rather than export.

This data will most likely have a limited impact on the currency quotations. The market has been determined by the result of the French presidential election. However, this element has decreased the risk of depreciation of the region’s currencies, including the zloty.