Daily analysis 23.08.2017

PMI indexes have shown a better than expected industrial situation in the eurozone as the common currency area has been noticeably gaining value especially in relation to the pound. The weakness of the pound has influenced the designation of new GBP/PLN lows, although the zloty has remained relatively weak.

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

• 3.45 p.m.: Industry and services PMI in the USA for August (estimate: 53.3 points and 54.9 points respectively).

The EUR/GBP has been at new highs

Today, the IHS Markit released August's preliminary PMI data for the eurozone. The composite index has been above the line and has risen to 55.8 points. This increase has been driven by the enterprise sector - its PMI has risen to 57.4 points, equaling the 6-year-high growth two months ago.

The improved industry's condition in the single currency area has been mainly due to the improving situation in the aforementioned sector in France and Germany. In the first of these countries, the PMI activity increased at the fastest pace in 76 months and reached 55.6 points. In the case of the largest economy in Europe, only 0.2 points have been missing to reach the 6-year peaks for two months ago at 59.6 points.

In August, the enterprise sector was below expectations as the PMI readings have been lower than expected in both the market consensus and last month’s level in the eurozone (54.9 pts) and in France (55.5 pts). After two months of decline, the PMI of the service sector in Germany has improved (53.4 points).

The publications of the indicated PMI have caused a relatively significant reaction to the euro in the context of no other relevant releases. The single currency area has been noticeably gaining in value - the EUR/USD pair has risen close to 1.18, while the EUR/GBP pair is close to the 0.92 boundary. This has resulted in the euro being the most expensive since October 2009 (excluding the events of the so-called "flash crash" of early October last year).

The rapid appreciation of the euro has caused the overall weakness of the pound. In relation to the dollar, the pound has been the cheapest for nearly two months - the GBP/USD rate has fallen below the 1.28 boundary for the first time since June 28. Recent pound price movements have shown how much the British currency has been currently under pressure - weakened by both, the Brexit negotiations and the lower probability of tightening monetary policy. Tomorrow, the pound fluctuations may increase further due to the second reading of GDP pace of growth data in Q2 (10.30 a.m.) - especially, in the case of deviations from the consensus (1.7% YOY, 0.3% QOQ).

The GBP/PLN pair has set new lows

The aforementioned PMI publications have caused quite a significant fluctuation of the euro and the pound, also in relation to the zloty. The GBP/PLN rate has fallen to 4.64 in the morning, which has been the lowest price for 6 years (excluding "flash crash"). On the other hand, the stronger euro has led to the EUR/PLN pair appreciation to be above 4.28 boundary today which is close to the upper range of last week.

However, the Polish currency has still been relatively weak. In relation to the Hungarian forint, it has been at just close to 7-month lows - the PLN/HUF rate has fallen below 71 boundary around the midday. In the afternoon (3.45 p.m.) the PMI for the USA will be published, which may cause higher dollar fluctuations. However, ISM readings have been more important to the US economy given the absence of other relevant publications, an increase in PMI could slightly strengthen the dollar and undermine the zloty.