Afternoon analysis 08.12.2015

Risk aversion spiked in the broad market. The zloty dropped against the franc. The CHF/PLN moved above 4 zlotys for the first time since July.

Today the Eurostat released the final report on the GDP growth in the third quarter. The eurozone economy expanded 0.3 percent on a quarterly basis and 1.6 percent against the previous year. It was in line with the forecast. In the second quarter the economy grew 0.4 percent and 1.6 percent, respectively.

The major growth factors were consumption and inventories growth. In addition, the government spending supported the GDP growth. Investment influence was neutral. However, the GDP growth was negatively affected by international trade as import increased more than export.

It turns out that drop of unemployment rate and loose stance of the European Central Bank supported consumption. The influence of the factor was visible in the GDP growth in spite of rather mild improvement. All in all, increased stimulus by the ECB (although below the expectations) will support the positive tendency in the longer term. Currently, the major challenge for the Frankfurt-based institution will be to spur investment.

Risk aversion prevailed in the broad market. It was reflected by declining stock indexes and growth of the safe-haven currencies. As a result, the franc gained against the euro. Also, the EUR/USD increased.

The zloty dropped against the franc

The Chinese data again disappointed. The report on international trade showed that export dropped 6.8 percent and import declined 8.7 percent. As a result, the trade surplus dropped to 54.1 billion dollars from 61.6 billion in the prior month. The latest reports from the Chinese economy point at deceleration of the growth. The tendency is strong and it is not very likely that it will change in the near future. This fact increased aversion against the emerging market currencies, including the zloty.

The EU Commissioner Valdis Dombrovskis was rather skeptical about the Polish government to increase spending. In an interview with the “Puls Biznesu” newspaper Dombrovskis said that if the 3 percent GDP level is exceeded, the EC will impose the excessive deficit procedure on Poland. The commissioner said it will be a bad signal if Poland returns to the procedure so soon.

However, Dombrovskis said that the Polish government representatives ensured him that the 3 percent level will not be exceeded. Today, Finance Minister Pawel Szalamacha said that the deficit below the 3 percent level remains the government's goal (according to the PAP agency interview).

Drop of oil quotes limit by the OPEC countries and weak reports from China are the factors responsible for the oil price decline. In addition, the commodity was pressured by the overall risk aversion in the markets. As a result, the oil price dropped below 37 dollars - the lowest level since 2009. This factor hit the Russia rouble. The USD/RUB increased to the highest level since August and it may soon exceed the record 70 level.

Given an adverse environment, the zloty dropped against major currencies. The CHF/PLN exceeded 4 zloty level. It was the highest level since July. Given the coming tightening of the monetary policy by the Federal Reserve in the next week, currently the probability of a stronger zloty is rather limited.