Fairly positive data from the eurozone has sustained the strength of the euro. However, the market has been ignoring the dovish signals from the ECB. Inflation from the United Kingdom indicate that there may be another decrease in wages of the Brits. A strong increase in Poland’s GDP. The main currencies have reached their long-term minimum against the zloty.
Most important macro data (CET – Central European Time). Estimates of macro data are based on Bloomberg information, unless marked otherwise.
14.30: Permissions for house building and initiated investments in the American real estates sector (estimates: 1.27 million and 1.26 million, respectively).
15.15: American industrial production (estimates: positive 0.4% MoM).
Weak dollar and fairly strong euro
The market trends that have been initiated last week continue. The dollar has been weak, because the market is estimating three rate hikes at maximum in the next three years after negative data regarding the American inflation. In addition, the capital has been flowing to the emerging markets due to the recent growth of prices of raw materials. This was also negative for the dollar. New historical records in the American stock market also have a positive impact on the sentiment.
The situation within the eurozone has been positive. In the first quarter, the GDP increased 1.7% YOY and 0.5% QoQ. Both of these values were consistent with the consensus. However, it’s worth noting that the differences between the GDP growth of particular countries were quite significant. Both the Italian and French economies only increased 0.8% YOY. A definitely better result was quoted by Germany, Holland and Spain (1.7% YOY, 2.8% YOY and 3.0% YOY, respectively).
It’s also worth emphasizing that the market seems to have been ignoring negative information for the euro. Yesterday, the ECB senior economist, Peter Praet, took note that the eurozone still requires a significant monetary stimulation. He also claimed that the risks for the eurozone have been more balanced, but they’re still directed towards negative readings. As a result, chances for a sooner monetary tightening within the eurozone still seem fairly minor. This may burden the euro in the forthcoming months.
Weak data from the United Kingdom
Today’s inflation data from the United Kingdom could theoretically support the pound. Due to a faster than expected growth of prices (2.7% YOY vs 2.6% YOY), the Bank of England may consider a sooner monetary tightening. However, there was also a significant slowdown in growth of real estates prices (from 5.8% to 4.1%). This may suggest that the situation in the real estates market may be deteriorating because of anxieties over the economic condition and a lower purchase power of households.
In addition, tomorrow’s data may show a worse growth in British salaries. This index has been unchanged since February. The current market consensus is at the level of 2.4% YOY, whereas inflation has reached 2.7% YOY. This would be negative for the British economy, because of a potential decrease in consumption, as well as in investments.
As a result, the pound’s value decreased. The GBP/USD went below 1.2900 and the EUR/GBP increased to its six-week maximum. The pound also wore-off against the zloty and the GBP/PLN went below 4.90 before noon.
Strong zloty and positive data
According to Eurostat, Polish economy increased 4.1% YOY in the first quarter. This is the second best result in the European Union next to Romania (positive 5.6% YOY). However, the data from seven countries haven’t been published yet. The reading that wasn’t seasonally equalized showed Poland’s GDP growth at the level of 4.0% YOY. This result was worse not only from the Romanian, but also the Hungarian GDP (4.1% YOY).
However, for the time being it’s difficult to say whether the GDP components showed a significant rebound of investments, or was this growth a result of very rapid private consumption. This will be revealed by the next reading from the Polish Central Statistical Office.
The zloty’s reaction to this data was fairly neutral. However, the Polish currency wore-off slightly before noon. Nevertheless, this doesn’t change the fact that the zloty has been benefiting from the positive sentiment towards the emerging market currencies, the same as both the forint and the Czech koruna have. The dollar went to its lowest level since August 2016 (3.79 PLN), the euro was worth the least since September 2015 (4.19 PLN) and the franc was just 0.02 PLN away from testing its lowest level since January 2015, when the SNB unpegged its exchange rate. Even though the zloty’s appreciation potential may wear-off in the short-term, the global trends towards the EM currencies seem to be stable for the time being. This should keep the zloty at a fairly high level.
This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without acknowledgement of the source is prohibited.
Fairly positive data from the eurozone has sustained the strength of the euro. However, the market has been ignoring the dovish signals from the ECB. Inflation from the United Kingdom indicate that there may be another decrease in wages of the Brits. A strong increase in Poland’s GDP. The main currencies have reached their long-term minimum against the zloty.
Most important macro data (CET – Central European Time). Estimates of macro data are based on Bloomberg information, unless marked otherwise.
Weak dollar and fairly strong euro
The market trends that have been initiated last week continue. The dollar has been weak, because the market is estimating three rate hikes at maximum in the next three years after negative data regarding the American inflation. In addition, the capital has been flowing to the emerging markets due to the recent growth of prices of raw materials. This was also negative for the dollar. New historical records in the American stock market also have a positive impact on the sentiment.
The situation within the eurozone has been positive. In the first quarter, the GDP increased 1.7% YOY and 0.5% QoQ. Both of these values were consistent with the consensus. However, it’s worth noting that the differences between the GDP growth of particular countries were quite significant. Both the Italian and French economies only increased 0.8% YOY. A definitely better result was quoted by Germany, Holland and Spain (1.7% YOY, 2.8% YOY and 3.0% YOY, respectively).
It’s also worth emphasizing that the market seems to have been ignoring negative information for the euro. Yesterday, the ECB senior economist, Peter Praet, took note that the eurozone still requires a significant monetary stimulation. He also claimed that the risks for the eurozone have been more balanced, but they’re still directed towards negative readings. As a result, chances for a sooner monetary tightening within the eurozone still seem fairly minor. This may burden the euro in the forthcoming months.
Weak data from the United Kingdom
Today’s inflation data from the United Kingdom could theoretically support the pound. Due to a faster than expected growth of prices (2.7% YOY vs 2.6% YOY), the Bank of England may consider a sooner monetary tightening. However, there was also a significant slowdown in growth of real estates prices (from 5.8% to 4.1%). This may suggest that the situation in the real estates market may be deteriorating because of anxieties over the economic condition and a lower purchase power of households.
In addition, tomorrow’s data may show a worse growth in British salaries. This index has been unchanged since February. The current market consensus is at the level of 2.4% YOY, whereas inflation has reached 2.7% YOY. This would be negative for the British economy, because of a potential decrease in consumption, as well as in investments.
As a result, the pound’s value decreased. The GBP/USD went below 1.2900 and the EUR/GBP increased to its six-week maximum. The pound also wore-off against the zloty and the GBP/PLN went below 4.90 before noon.
Strong zloty and positive data
According to Eurostat, Polish economy increased 4.1% YOY in the first quarter. This is the second best result in the European Union next to Romania (positive 5.6% YOY). However, the data from seven countries haven’t been published yet. The reading that wasn’t seasonally equalized showed Poland’s GDP growth at the level of 4.0% YOY. This result was worse not only from the Romanian, but also the Hungarian GDP (4.1% YOY).
However, for the time being it’s difficult to say whether the GDP components showed a significant rebound of investments, or was this growth a result of very rapid private consumption. This will be revealed by the next reading from the Polish Central Statistical Office.
The zloty’s reaction to this data was fairly neutral. However, the Polish currency wore-off slightly before noon. Nevertheless, this doesn’t change the fact that the zloty has been benefiting from the positive sentiment towards the emerging market currencies, the same as both the forint and the Czech koruna have. The dollar went to its lowest level since August 2016 (3.79 PLN), the euro was worth the least since September 2015 (4.19 PLN) and the franc was just 0.02 PLN away from testing its lowest level since January 2015, when the SNB unpegged its exchange rate. Even though the zloty’s appreciation potential may wear-off in the short-term, the global trends towards the EM currencies seem to be stable for the time being. This should keep the zloty at a fairly high level.
See also:
Afternoon analysis 15.05.2017
Daily analysis 15.05.2017
Afternoon analysis 12.05.2017
Daily analysis 12.05.2017
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