Afternoon analysis 08.11.2016

The German industrial production is disappointing; trade balance remains at a high level. The Polish unemployment rate for October went down. However, this doesn’t impact the zloty’s quotations, which are mainly dependent on the global sentiment.

Mixed data from German economy

Today’s data from Destatis regarding the German industrial production for September, was at the level of negative 1.8% m/m. This result appeared worse than expected (netagive 0.5%). The largest decline was quoted in energy production (negative 3.1%), capital goods production (negative 2.4%) and consumption goods (negative 1.9%).

A decrease in industrial production was also the largest month on month decrease in more than two years. This shows the volatility size of this data, because in August this index quoted the largest month on month growth in five years (3% m/m, revised from 2.5%).

Destatis also published initial trade balance data from Germany. This was at the level of 24.4 billion euro, against the 22.4 billion euro consensus. Export increased 0.9% y/y, while import decreased 1.4%. However, seasonally corrected data showed a decrease in export, as well as in import by 0.7% m/m and 0.5% m/m, respectively (vs the consensus of negative 0.8% and negative 0.2%, respectively).

Even though both export and import decreased in month on month report, we need to keep in mind that the German trade balance remains near its historical maximum. The recent Sentix, Ifo and GfK reports show an improving sentiment within the German economy. In the long-term, this is positive for the euro, as well as for the zloty (Germany is one of Poland’s main trading partners.) Today, the EUR/USD was moving in a quite limited range of approximately 1.103 – 1.106.

Lower unemployment rate in Poland

The Ministry of Family, Labor and Social Policy estimated today that the Polish unemployment rate will be at the level of 8.2%. This would be 0.1% less than it was in September, as well as 1.4% less than in October 2015. Unemployment rate went down in eleven regions and it remained unchanged in five regions. The lowest unemployment rate was quoted in wielkopolskie (5%) and the lowest was quoted in warmińsko-mazurskie (13.7%).

The above data had a limited impact on the zloty, which remained at a similar level as it was yesterday. However, the franc was globally weaker, which was reflected in a depreciation of the CHF/PLN from 4.03 to 4.02. Nevertheless, it’s most likely that the zloty will mostly be influenced by the result of presidential elections in the USA.

Tomorrow’s events

Tomorrow will most likely be dominated by news regarding initial results of the American presidential elections. According to the latest Reuters/Ipsos survey, the chances of Hilary Clinton winning the elections is at the level of approximately 90%. Her victory would most likely be received positively by the markets, which would strengthen the dollar.

At 10.30 AM, the Office for National Statistics will publish the data regarding the British trade for September. The foreign trade balance is currently near its historical minimum. This index has been gradually growing since the break of 20th and 21st century. The data for August appeared to be worse than expected and showed a 12.11 billion pounds deficit.

The consensus for September assumes that this reading will be at the level of negative 11.3 billion pounds and negative 3.4 billion pounds for the non-EU countries. Unlike the total trade deficit, we may observe a trend of decreasing deficit for the non-EU countries. In July 2008, it was at the level of negative 6.08 billion pounds, while in August it was at the level of negative 3.75 billion pounds. A weaker pound might have supported the British export recently.

At approximately 12.00 AM, the National Bank of Poland will publish the data regarding the current interest rates after a two-day meeting of the Monetary Policy Council. The market consensus assumes that interest rates will remain unchanged (1.5%). After all, the Council indicated during their previous meeting that interest rates will potentially occur at the beginning of 2018. Investors will focus more on the announcement, as well as the press conference, which is scheduled for 16.00 (4.00 PM). They may give investors some clues regarding the path of potential interest rates changes in the future.

At 16.30 (4.30 PM), the Energy Information Administration (EIA) will publish the data regarding last week’s oil supply in the USA. The recent level of this index (14.42 billion barrels) deteriorated investors sentiment. Moreover, Reuters informed later that Saudi Arabia suggested an increase in its oil production level. This caused oil prices to go below the level from before OPEC agreement in Algiers from September.