Daily analysis 25.01.2017

The German business sentiment wore-off in January. The Polish unemployment rate for December was consistent with the market consensus. President of the National Bank of Poland sees chances for Poland in the potential revival of the American economy.

German optimism and weaker dollar

The German companies have started this year with a slightly worse sentiment. The Ifo institute business sentiment index for the German economy went down 1.2 points in January and is currently at the level of 109.8 points. This is its first decline since August 2016, as well as its lowest level in four months. However, this result is still near the five-year maximum (111.3 points).

The above result was mainly a result of a lower optimism regarding the business perspectives for the forthcoming six months. This subindex went down to its lowest level since August 2016. However, evaluation of the current situation has been improving for the fifth consecutive month. Nevertheless, the business sentiment deteriorated in basically every economic sector.

The above data should have a very limited impact on the euro, which has been weakened by the mild monetary policy from the European Central Bank. Moreover, the global sentiment is currently being set by actions from the new American president, as well as moves on the dollar. In his yesterday’s tweet, President Donald Trump mentioned about building a wall (on the Mexican-American border) and that the current day will be significant for the national safety.

Reuters informed that today, Trump will sign a resolution regarding limits in influx of refugees. This will include temporary suspension of visas for citizens of Syria, as well as of six other countries of the Middle East and Africa. However, further lack of the planned increase in infrastructural expenses and decrease in taxes, causes a further wear-off of the dollar. Protectionist elements of the new administration’s policy have the same impact on the American currency. This is because they may negatively impact the international trade in the long-term.

As a result, the dollar has remained weak. The EUR/USD was within the range of 1.07-1.075 and the USD/JPY was near 113.5. This caused the dollar’s index (DXY) to test the level of 100 points. However, the pound continued its appreciation this morning. This was caused by yesterday’s decision from the British Supreme Court, as well as by the dollar’s global wear-off. The GBP/USD reached the level of 1.26, which is its highest since December 14th.

Zloty is stronger

Adam Glapiński, the president of the National Bank of Poland (and the chairman of the Monetary Policy Council), said in his interview with the Polish Press Agency that the MPC may consider changing interest rates in 2018. This confirmed the announcements from the recent press conferences. Moreover, Glapiński emphasized in the interview that if the economy doesn’t develop faster in 2018, interest rates will remain unchanged..

Nevertheless, Glapiński expects an acceleration of the Polish economy soon. In his opinion, investments should begin to grow this summer, because the EU subsidies will be increased at that time. This would guarantee at least a 3% GDP growth for 2017. Moreover, Glapiński claims that the potential economic revival in the USA will be positive for the European Union, as well as for the Polish economy.

The Polish Central Statistical Office (GUS) informed that the unemployment rate for December was at the level of 8.3%, which was consistent with estimations from the beginning of January. However, this result was 0.1% higher than the result for November. The Polish government forecasts that the unemployment rate will reach the level of 8% in 2017.

The zloty’s quotations were relatively calm this morning. The EUR/PLN was pushed from 4.37 to 4.354. However, only going outside the 4.35-4.40 range could set a new trend in the EUR/PLN quotations. This will most likely happen due to the GUS data regarding the GDP growth for the fourth quarter.

The PLN/HUF remains above the 71 level. Due to the dollar’s global wear-off, the USD/PLN went near 4.05. However, the pound gained value due to the verdict from the British Supreme Court. The GBP/PLN reached the level of 5.11.