Afternoon analysis 20.04.2016

The euro gained before the ECB meeting. The Polish finance ministry showed an optimistic outlook for the economy. The zloty recouped some of its losses.

Tomorrow's meeting of the European Central Bank may affect the market outlook in the near term. Recently, there have been some rumors that the ECB may signal additional stimulus. In this context, the most important was the Bloomberg agency survey which suggested the September meeting as a possible moment of additional stimulus.

However, the euro's gain in recent days suggests that a similar scenario is not prevalent in the markets. The Frankfurt-based institution eased its stance in March, and it is not very likely it would suggest additional measures just one month later. The next issue is the severe critique of the ECB's monetary policy coming from the German lawmakers. Lastly, the bank lending survey that was released yesterday showed an ongoing improvement in the lending conditions and credit demand.

Tomorrow, if Mario Draghi says that the monetary authorities are willing to wait to assess the impact of introduced measures, the common currency may gain. However, the move may be limited, because in the long term, a more important factor would be the divergence among the monetary policy between the ECB and the Federal Reserve.

On Wednesday, the oil price resumed its losses. Still, the price remains above the 40 dollar level in the New York market. The commodity dropped after the information that the strike ended in Kuwait. The oil price did not affect the broad market. Today, the green color prevailed in the most important markets.

Zloty at low level

NBP Board Member Adam Glapiński said that the monetary authorities will continue the conservative monetary policy (source: PAP). He assessed that the Polish banking sector is steady. Regarding the franc-denominated home loans, Glapiński said the major issue is to secure the stability of the banking sector. Adam Glapiński is the front runner for the NBP President position after Marek Belka’s tenure ends in June.

Poland's finance ministry published the updated convergence program report. The government expects that private demand will remain the major growth driver. The economy will expand at the 3.9 percent pace in 2017 and 4-4.1 percent in the 2018-19 period. The unemployment rate is expected to drop to a record low at 5.5 percent in 2019. It means the government expects that the labor market expansion will continue. In the coming year, wages and labor productivity will also increase. Given the situation, disposable income will increase, which will be amplified by the 500 plus program. The finance ministry expects that the deflation will hold this year, but the price growth will rebound in the next few years.

The report showed that the government expects the public finance to stabilize. After hitting 2.9 percent GDP in 2017, the deficit is going to drop. The finance ministry expects the zloty to be slightly weaker this year than in 2015. Later the zloty will appreciate.

On Wednesday, the zloty posted some gains. It moved higher in the second part of the day. However, the zloty remained relatively weak and performed worse than the forint.