Afternoon analysis 09.01.2017

New positive data from the German economy confirm its very good condition. The Sentix investor trust index not only shows an improvement in sentiment within the euro zone, but also in the countries of eastern Europe. No larger changes on the zloty.

Positive data from Europe

Destatis published the data regarding the German trade balance for November. Export and import have both reached their historically high values in the Mont over Month interpretation (108.5 billion and 85.5 billion euro, respectively). Moreover, export increased by 5.6% YoY and import increased by 4.5% YoY. This caused the trade balance to reach the level of 22.6 billion euro (seasonally equalized: 21.7 billion euro) in November, which is its highest level since May.

Collective export reached the level of 1100 billion euro between January and November. This was slightly less spectacular than its growth in the analogical period of 2015. In November, the largest growth in export was quoted in export to the countries from outside the EU (7.6% YoY). Export to the euro zone countries increased by (4.3% YoY). The situation was slightly different in the case of import. This index increased the most in the case of the EU countries which are not in the euro zone (8.5%).

Destatis also published the data regarding changes in industrial production for November (positive 0.4% MoM vs positive 0.6% MoM). Moreover, production growth for October has been revised from 0.3% to 0.5%. The largest growth was quoted in the building sector (1.5%) and the energetic sector experienced the largest decline (0.4%).

The above data confirm a very good condition of the German economy. This is a positive information for Poland as well, due to the fact that this country is Germany’s largest trading partner. However, the euro’s reaction was very limited, because the sentiment related to the ECB monetary policy remains dominant.

Another positive information for the euro zone was the investor trust index, which was published by Sentix. This index increased from 10 points in December to 18.2 points in January. This is its highest level since August 2015. However, the largest improvement was quoted in investors’ estimates regarding the euro zone’s current economic situation, which is at its highest level in approximately five years.

It’s worth noting that the general index for the eastern European countries increased from 1.8 points to 7.1 points. Moreover, this growth caused an increase in subindexes of the current situation, as well as of the future economic expectations. Investors are most likely counting on an improvement in relationship between the USA and Russia (which was announced by Donald Trump). This would cause an appreciation of the eastern European currencies against the euro. The euro should remain relatively weak in 2017, due to the above mentioned ECB monetary policy.

No larger changes on zloty

Today, the zloty worked-off a portion of its last week’s gains. At approximately 12 AM, the EUR/PLN was near 4.38, the USD/PLN was near 4.16 and the CHF/PLN was near 4.085. However, the zloty worked-off its losses against the forint and the PLN/HUF reached the level of 70.5.

The zloty gained value against the pound. However, this was mainly a result of the global wear-off of the British currency, which was caused by the comments from Prime Minister Theresa May (anxieties of “hardcore Brexit”). Today, the GBP/PLN was at its lowest level since November 11th (5.05 PLN).

Tomorrow’s events

At 2.30 AM, the National Bureau of Statistics of China will publish the CPI data for December. This index reached its lowest level in approximately twelve months in August (1.3% YoY). This strengthened anxieties regarding a slowdown in the Chinese economy. However, this index has been increasing since September and reached the level of 2.3% in November.

The market expects that the reading for December will be at a similar level. If the final result is inconsistent with the consensus, this would cause a larger volatility in the currency market, because of the recent activity of the USD/CNY.

At 12. AM, the National Federation of Independent Business (NFIB) will publish its index for optimism of small business in the USA for December. This index went from 94.9 points to 98.4 points in November, which was its highest level since December 2014. This growth was mainly caused by expectations regarding Donald Trump’s policy.

The behavior of this index was similar as the University of Michigan consumer trust index. The market estimates that optimism among the small business continued growing in December (99.6 points). This would support the dollar. However, if the reading is above 100.4 points (the highest in at least eleven years) would cause appreciation of the dollar, due to the lack of more significant data tomorrow.