Daily analysis 01.12.2015

Weak readings from Switzerland may be a good excuse for the SNB to loose its monetary policy in line with the ECB. The PMI from the euro zone was solid but it should not change Draghi's view on easing. Polish readings should stabilize the zloty in the medium term.

Macro data (CET- Central European Time). Survey is supplied by Bloomberg unless otherwise noted.

• 16.00: US manufacturing ISM reading (survey: 50.5 points)

Weak Swiss data

Readings from Switzerland were significantly below expectations today. The GDP remained unchanged while economists expected increase by 0.2% q/q. Moreover the retail sales dropped by 0.8% y/y and the data for previous month was revised from +0.2% y/y to minus 1.2% y/y.

Improvement in Swiss manufacturing is not seen in the PMI index which dropped below 50 mark – the level which separates contraction and expansion of the industry. Reading the morning publications it is also worth to note the KOF data revealed yesterday. The leading index dropped to 97.9 level – the lowest since April. The Institute noted that sentiment worsening in manufacturing and, albeit in slower pace, regarding export.

It is also worth to put the Swiss data concerning the action from the ECB. If Mario Draghi and his colleagues loose the monetary policy more than expected then there would be some appreciation pressure on the Swiss franc, especially to the euro. However, currently the SNB may be more prone to cut the benchmark and proceed the stronger currency interventions suggesting that this decision should reduce the burden on the economy.

It may also be a good news on franc regarding domestic debtors. More activity from the SNB reduces the threats that CHF/PLN rises above 4.00. Despite that it is not possible to rule out the capitulation of the SNB, the weaker readings reduces the risk that the central bank changes its policy.

The ECB in focus

Investors are still in the “waiting mode” reading main events this week – the ECB decision and November readings from the US job market. The final PMI publication on manufacturing in the euro zone were fairly solid, but they should not have a visible impact on the monetary loosening prepared by Mario Draghi

It can be also confirmed by the chief Markit economist, the firm which runs the leading index on manufacturing. Chris Williamson writes that “with growth remaining modest, prices falling and manufacturing still some 10% smaller than its pre-crisis peak, the scene is set form the ECB to unleash further stimulus at its December meeting to ensure momentum continues to build.”

The foreign market in a few sentences

Today the main event is ISM publication from the States. Theoretically Chicago PMI which was published yesterday may suggest that manufacturing shrinking can be translated to the whole country. On the other hand, however, the recent regional PMI readings were not good indicators for the overall condition of the manufacturing. But if the ISM moves below 50 mark (expectations at 50.5), and especially if it slides below 48.9 level, the lowest since 2009, it might push the dollar lower. Contrary with publication in line with consensus or higher the dollar can resume its appreciation trend on the view that industry is in modest shape despite strong headwinds from strong currency and slump in mining.

The PMI was fairly good

After Monday's reading of the GDP for Q3 today the PMI data hit the wire. The leading manufacturing indicator was slightly below expectations but the subindexes show positive trends in the Polish economy. Markit noted that employment rose 28th time in a row – the longest pace in history of the survey. There was also increase in both production and new orders.

Commenting the reading Trevor Balchin, senior economist at Markit writes that “the latest data signal that official manufacturing output growth will stabilise at or just below 5% y/y in the coming months”. Theoretically the recent reading should support the scenario of sustained Polish growth and give some support to the currency after the fears of fiscal and monetary policy changes abate.

Anticipated levels of PLN according to the EUR/USD rate:

Anticipated GBP/PLN levels according to the GBP/USD rate: