Daily analysis 10.02.2017

The American administration suggested that we may expect an announcement of the complex tax reform in the USA in the forthcoming weeks. The zloty is stronger due to the comments regarding credits denominated in francs.

Most important macro data (CET – Central European Time). Estimates of macro data are based on Bloomberg information, unless marked otherwise.

• 16.00: The University of Michigan consumer sentiment index (estimates: 98 points).

An impulse for the dollar

Investors have been waiting for suggestions regarding changes in the tax system from President Donald Trump. Due to the fact that these elements were not appearing in his testimonies, the market has focused on both immigration and protectionist matters. Therefore, the dollar was not able to continue its appreciation. However, yesterday new comments from the American administration appeared, which may suggest potential changes.

According to Reuters, Donald Trump declared during his meeting with the airline representatives in the White House that, “we're going to be announcing something I would say over the next two or three weeks that will be phenomenal in terms of tax and developing our aviation infrastructure.”

The White House’s spokesperson, Sean Spicer, revealed more details. He claimed that, “I think we’re looking at, in the next few weeks, rolling out the outline of a comprehensive tax plan that we’ll be working with Congress on that will address both the business side of the tax ledger as well as the individual rates. But it’s going to be a comprehensive plan, something that we haven’t seen since 1986.”

Spicer also noted that the plan is to, “create a tax climate that not only keeps jobs here (in the USA – author’s footnote) but makes it - incentivizes companies to want to come here, to grow here, to create jobs here, to bring their profits back here.”

These comments may suggest many things. Primarily, it’s becoming increasingly likely that a decrease in taxes will be announced relatively quickly. Secondly, it’s also possible that this will be combined with investments in infrastructure.

The fact that the encouragement for the American companies to invest in the USA has been repeatedly emphasized, may suggest that Trump’s administration supports border tax adjustment. This decreases encouragement to import, but at the same time it’s less controversial than traditional custom duty (especially regarding trade agreements and the US membership in the WTO).

All of the above information is favorable for the dollar. However, the market has behaved relatively calm. The dollar strengthened slightly and the profitability of the American two-year treasury bonds increased by 4 base case points. However, if the new statements from crucial members of the White House administration confirm the reform plan and Republicans start suggesting changes in the tax system as well, the changes for a stronger dollar will increase.

Stronger zloty

This morning, the EUR/PLN was within the range of 4.31-4.32. However, the Polish currency gained value significantly after 8.00 AM. Due to the fact that there was no significant macroeconomic data at that time, this appreciation must have been caused by Jarosław Kaczyński’s comments, which he made in his interview with the Polish Radio.

According to the Polish Press Agency, Kaczyński said: “I think that they (the franc credit debtors – author’s footnote) should take the matters in their own hands and go to the court. This is not because they can’t trust the president or the government, but that both the president and the government are in a situation, which is significantly determined with economic conditions.”

After 9.00 AM, the EUR/PLN was near the area of 4.2950. Moreover, the zloty was 0.5% stronger against the forint. This suggests that its appreciation was caused by local events. The forthcoming hours should be calmer for the zloty. However, pressure on the zloty’s wear-off may increase over the next weeks, due to increasing likelihood of the dollar’s strengthening.