Daily analysis 05.09.2017

05.09.2017 12:53|Marcin Lipka

Final eurozone PMI data were slightly below preliminary readings, but retail sales were in line with expectations. The UK services activity at almost one-year lows. Extremely low GDP reading from Switzerland. The zloty continues gaining after a solid session on Monday. The EUR/PLN is in the 4.23-4.24 range.

The most important macro data (CET - Central European Time). Surveys of the macro data are based on information from Bloomberg unless noted otherwise.

  • 13.30: Fed's Governor Lael Brainard speech on monetary policy,
  • 16.00: Factory orders from the US (survey: minus 3.3%).

Reading from the euro zone and the UK

The PMI readings both from the euro zone and the UK hit the wires in the morning. For the common currency area, IHS Markit reported final publication which was marginally below preliminary data (54.7 vs. 54.9 points). Combining services and manufacturing the final IHS Markit data was lower by 0.1 points compared to the first estimate (55.7 points).

The survey noted that activity in the euro zone slowed somewhat albeit taking into the account historical connection to the growth in Q3 should be around 0.6% q/q. Chris Williamson, chief IHS Markit economist, claimed that if the August performance continues the final GDP reading for 2017 may top 2.1%. It would be the highest growth rate in a decade.

The slightly worse performance was seen in the UK. Services PMI dropped to 11-month low and recorded 53.2 points (survey 53.5 points). High level of uncertainty was reported in the data, but on the other hand, the employment component was at the highest level in 19 months. It confirms the recent official ONS data which also pointed to the solid job market.

In summary for the UK data Chris Williamson claims that August PMI readings are in line with 0.3% GDP q/q, He also notes that "the level of the PMI remains more consistent with policymakers erring toward stimulus rather than hiking interest rates, suggesting the doves will continue to outnumber the hawks."

Before noon Eurostat also published retail sales data from the UE. For the common currency area, it rose at 2.6% y/y which was in line with expectations. Regarding the highlights, it is worth noting that sales in France increased by 5.3% y/y while Spanish data disappointed with 0.5% y/y result. The UE leaders sales rose by 10% y/y (Slovenia), 8.8% y/y (Romania) and 7.9% y/y (Poland). Overal today's data were not surprising, and market participants are probably getting ready for the ECB meeting which is scheduled for Thursday.

Weak data from Switzerland

We analyze macroeconomic data from Switzerland rarely as it has a fairly limited impact for the franc. However, today's readings are particularly weak especially taking into the account solid performance in the region.

The Swiss GDP rose only by 0.3% y/y. It may be hard to accept, but the data was the lowest since q4 2008 when the growth was also at 0.3% y/y level. Looking at the components of growth all key components contributed at a smaller level. The negative contribution was recorded concerning net trade where visible export dropped by 1.3% y/y while import rose by 2.5% y/y.

Probably the Alpine country economy will gain some ground in the following quarters, but today's data may be a crucial argument to keep the monetary policy at extremely loose level. It should also be franc negative signal.

The PLN continues gains

The Polish currency is slightly stronger comparing to Monday's close. It still may be an effect from positive Moody's report on Polish growth and deficit perspective for this year. The EUR/PLN slided toward 4.23 before the midday. Much better PLN condition is also seen to the forint which.

It is possible that some market participants may assume that tomorrows MPC statement may be more hawkish than in July as some higher consumption data could bring some upbeat tone to the interest rate perspective.

During the afternoon session, it is worth to analyze the Lael Brainard statement. It is possible that the Governor may sound more dovish than usually or even suggest that her preferable view is to keep the interest rate on hold until the end of the year. It would alos be positive message for the PLN.

 


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