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Daily analysis 19.09.2017

19 Sept 2017 12:30|Marcin Lipka

One day before the Fed meeting, the EUR/USD pair is supported by relatively good macro data from the eurozone and no increase in yields on the US Treasury bond. The franc has been the cheapest in relation to the euro from "black Thursday". The pound is somewhat weaker after Carney's statements. The zloty remains under pressure. The EUR/PLN pair nearly six-month highs, slightly below 4.30 boundary.

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

  • 2.00 p.m.:Industrial and construction production from Poland (estimates: 5.9% YOY and 24% YOY respectively),
  • 2.00 p.m.: Retail sales from Poland (estimates: 7.1% YOY),
  • 2.30 p.m.: Building permits in the US and housing starts in real estates (estimates: 1.17 million and 1.22 million respectively, figures for August annualized).

Slightly higher EUR/USD trading

The main currency pair is slightly above yesterday's closing level and moves slightly below the 1.20 boundary around midday. The EUR/USD is supported by a lack in growth in US government bond yields, despite another record in US indexes and relatively good macro data from the eurozone. In the morning, we could also observe a noticeable weakening of the franc, which also supports the quotations of the single area currency.

Today's economic data from the eurozone is not particularly important, however, it may suggest a continuation of the good economic condition in the coming months. July's construction output increased by 3.4% YOY, and June's additional data was revised upward by 0.9 percentage points to 4.3%. The publication is also analogous with the whole date from the second quarter (3.6% YOY), which shows that the sector continues to show positive trends at the beginning of the second half of the year. Italy is by far the worst out of the individual countries of the eurozone, where construction decreased in both July and the second quarter of this year. The situation is good in most other countries.

The results of the German economists' climate index can also be viewed positively. The ZEW results for September increased to 17 percentage points which is a noticeably higher than expected result (12 points). The current account balance for the eurozone is also better than consensus. In seasonally-adjusted terms, it amounted to 25.1 bn EUR in July, compared to the expected 4bn lower result in July. June's data was also revised up by 1.5 billion. It can, therefore, be said that today's macro readings support the single currency area.

The main currency pair is also positively influenced by the behaviour of the franc. The EUR/CHF breached the 1.1550 boundary. These are the lowest levels of the Swiss currency in relation to the European currency since the second half of January 2015.

Weaker pound

Yesterday's speech by Marek Carney, the head of the Bank of England, brought a slight weakening of the sterling. He repeated last week's mention of the possibility of withdrawing part of the monetary stimuli in the coming months but stressed at the same time, that monetary policy tightening would be gradual and limited.

Some market participants could perceive these comments as a promise for an increase of only 0.25 percentage points and the finalisation the process of the monetary policy's standardization at this stage. However, the whole speech seemed to be a bit more hawkish, suggesting that higher interest rates might be necessary for Brexit-related disturbances. It, therefore, seems that the Bank of England's decision will not be a one-off decision, which should further continue to support the British currency valuation.

Zloty very close to half-year lows in relation to the euro

Recent dovish comments from representatives of the national monetary authorities still cause downward pressure on the zloty despite good macroeconomic readings from the Polish economy. The EUR/PLN is close to the 4.30 boundary, which also means that it has been testing the highest levels for half a year. The weak condition of the national currency does not allow the franc to drop significantly. Although today, the Swiss currency has reached the lowest levels in relation to the euro since "black Thursday", the CHF/PLN pair is approx 5 gr above the lows reached at the beginning of August (3.67 PLN ).

In the afternoon, the Polish Central Statistical Office (GUS) will publish data on industrial production and retail sales. The market consensus is 5.9% YOY and 7.1% YOY respectively. These values are almost in line with the 6-month average, and since the number of working days last month was the same as the year before, the actual reading should indeed be close to consensus. Very strong increases can be observed in the construction production. In August last year it fell by over 20% YOY, so last month's highs of up to 30% YOY should not be a surprise.

The zloty's response to the data, however, should not be strong, even if it will slightly differ from the forecasts. The MPC's comments for the PLN valuation are much more important. Confirmation of the last dovish suggestions by other members of the Council may result in the EUR/PLN exit above the 4.30 boundary. Testing this level would also be the core scenario, if tomorrow's Fed messages were to be relatively hawkish.


19 Sept 2017 12:30|Marcin Lipka

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.

See also:

18 Sept 2017 15:04

Afternoon analysis 18.09.2017

18 Sept 2017 12:44

Daily analysis 18.09.2017

15 Sept 2017 15:25

Afternoon analysis 15.09.2017

15 Sept 2017 12:26

Daily analysis 15.09.2017

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