Afternoon analysis 10.04.2017

The sentix investor consumer index for April increased to its highest level since August 2007. However, this data didn’t have a positive impact on the euro. The zloty became weaker due to a slightly worse sentiment towards the emerging market currencies.

Eurozone’s data

The sentix investor consumer index for April increased to the 23.9 points, which is its highest level in approximately 10 years. This index has been gradually increasing since mid-2016. This month, an increase was quoted in both of this index’s components (expectations and current situation).

Investors’ sentiment towards Germany remains positive as well (the best result in two years). However, according to sentix the German economy may overheat, because the expectations subindex is nearing the level of 60 points (59 points, currently).

Nevertheless, this data had a relatively limited impact on the euro, which was in a globally worse condition today. The EUR/USD went down from 1.06 to approximately 1.057. Due to very little macroeconomic data, the currency fluctuations were relatively minor today. The dollar’s index remains within narrow range of 101-101.2 points.

Zloty is weaker

Today, the zloty lost value against the main currencies, which was mainly caused by deterioration in the sentiment towards the emerging market currencies. The zloty gained approximately 0.3% against the Hungarian forint and managed to reach the level of 73.6. However, the USD/PLN was near the 4.00 level.

We need to keep in mind that the recent appreciation of the zloty was mainly caused by the positive sentiment towards the emerging market currencies. The Polish currency has been weakened internally by the dovish attitude of the Monetary Policy Council. Therefore, the zloty may lose significantly, if the positive sentiment towards the emerging markets is reversed.

Tomorrow’s events

At 10.30, the British Office for National Statistics will publish the final inflation reading for March. It seems unlikely that this reading will be inconsistent with this index’s initial reading. Therefore, its impact on the pound should be limited. However, we should keep in mind that the market may focus on baseline inflation (its initial reading was at the level of 2% YOY.) If this index’s final reading is higher than its initial reading, this may increase the likelihood of more rapid monetary tightening in the United Kingdom.

At 11.00, the ZEW institute will present the data regarding the economist sentiment for both Germany and the eurozone. In the case of the eurozone, this index has been increasing since mid-2016. However, the economist sentiment for Germany has been relatively low. Nevertheless, it is expected to increase from 12.8 to 14 points. The eurozone’s economist sentiment is expected to go slightly down from 25.6 points to 25 points.

Also at 11.00, the Eurostat will publish the eurozone’s industrial production data for February. In January, this index appeared to be worse than expected (0.6% YOY vs 0.9% YOY). Currently, the market consensus is at the level of 1.9% YOY. Taking into consideration that no significant macroeconomic data from the USA is scheduled for tomorrow, positive data from the eurozone may support the euro, at least temporarily.

At 14.00, the Polish Central Statistical Office (GUS) will present the second CPI reading for March. The initial reading was at the level of 2% YOY, which was worse than expected. Nevertheless, the zloty’s reaction was limited, because the low inflation trend was also applied to the other European countries. The second CPI reading most likely will not have a strong impact on the zloty’s evaluation. This is because the zloty has recently been mainly determined by the positive sentiment towards the emerging market currencies, rather than by the local events.