Daily analysis 14.09.2015

Readings from the US and China don't push for Fed's interest rate hike. Economists surveyed by the “WSJ” significantly trimmed odds for monetary tightening in September. Current account data from Polish economy might be much weaker than expected.

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

• 14.00: Balance of Payments from Poland from June: current account (survey: minus 527 million euro); trade balance +107 millions euro.

Weak data from the US and average from China

The EUR/USD pair is supported by weaker data from the US and worsening growth in China. Consumer confidence reports from across the pond published on Friday were the weakest in a year while the speed of the fall was the fastest in two years.

No progress was seen in Chinese data. Industrial production rose 6.1% y/y while economists expected growth of 6.5%. Slightly better was, however, the retail sales (10.8% vs 10.6% y/y). The readings are set to fail to keep the GDP growth at 7.0% y/y especially due to lower investments in the real estate projects.

Calculated by Bloomberg GDP figure based on monthly data shows y/y growth after August at 6.6%. As a result the Q3 might be weaker than Beijing policy makers anticipate. Finally it can be a reason for the Fed to leave interest rates unchanged.

Economists more sceptical on September hike

August survey run by “The Wall Street Journal” showed that 82% economists expected Fed's interest rate hike in September. The situation has changed significantly in the recent weeks.

According the “WSJ” survey run between September 4th and 9th only 46% economists expect that Fed will hike the benchmark this week. It is a clear difference especially that odds for this month increase was high for many months. Currently 35% of economists think that Yellen and her colleagues are set to increase rates in December. The remaining 20% is equally divide by hike in October and year 2016.

Another time some concerns about China were confirmed. It was, however, not an issue regarding the speed of growth but the case regarding clarity of Beijing economic reports. According to more than 96% economists surveyed by the WSJ “China's gross-domestic-product estimates don't accurately reflect the state of the world's second-biggest economy.”

With such strong changes in expectations regarding monetary tightening and deep uncertainty on Chinese publications the odds for interest rate hike in the US decreased significantly. It also should keep the pressure on the US currency at least till the latter part of the week.

The foreign market in a few sentences

Despite the fact that until the Federal Reserve meeting there are still several macroeconomic publications the odds for any significant change are relatively small. The market will be getting ready to the Fed's meeting and how to play the FOMC decision. Currently the base case scenario till the middle of the week is the dollar weakness, but taking into account how important is the decision we should expect that the speculative part of the market may disturb the valuations even before September 17th.

Current account data may be negative for the zloty

The EUR/PLN trading is fairly stable in the recent hours and most transactions were processed below 4.21 level. However, after 14.00 CET we can expect some more volatility on the zloty due to NBP current account (C/A) publication.

According to the Bloomberg consensus the C/A balance for July is expected to be minus 527 millions euro and trade balance is expected to be +107 million euro. But on Friday the GUS has already published the trade data for first 7 month. Comparing it to the previous readings we can see that the balance significantly deteriorated.

According to the GUS instead of the Bloomberg consensus surplus we should expect a large deficit around 1 billion euro. As a result the C/A defict can be even minus 1.5 billion euro what is a significant difference comparing expectations at minus 527 million euro. Finally it is possible that after 14.00 CET investors may see a weaker zloty. Additionally if the US market deteriorates in the evening the EUR/PLN might finish the day around 4.22 and the CHF/PLN could rise toward 3.85.

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

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