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Daily analysis 28.02.2017

28 Feb 2017 12:33|Marcin Lipka

Donald Trump’s testimony will mainly concern economic matters. However, the complete budget project may not be revealed until the beginning of May. Increasing profitability of the American treasury bonds. The recent rebound of Polish business cycle has decreased the anxiety over the negative GDP.

Most important macro data (CET – Central European Time). Estimates of macro data are based on Bloomberg information, unless marked otherwise.

  • 14.30: Second GDP reading for the fourth quarter from the USA (estimates: positive 2.1% QoQ in annualized interpretation).
  • 15.45: Chicago PMI (estimates: 53.3 points).
  • 16.00: Conference Board consumer trust index (estimates: 111 points).
  • 03.00: Donald Trump’s testimony in front of the American Congress.


Two events that cast more light onto Donald Trump’s testimony, as well as onto the American budget, occurred yesterday afternoon. During his meeting with the representatives of the National Governor’s Association, the American president said that the budget matters will be the main topic of his today’s testimony.

Moreover, Donald Trump announced a start of large infrastructural expenses, which will be discussed in front of the Congress. The topic of the future federal incomes and expenses had been continued during the press meeting of the White House’s spokesperson, which was additionally attended by Mick Mulvaney, Director of the Office of Management and Budget.

Mulvaney started his statement with a declaration that the budget project scheduled for mid-March will not be complete. This will only contain a portion of changes (defense expenses, among others). The matters regarding taxes or infrastructural investments will be revealed at the beginning of May.

This means that the impact of the election campaign announcements from both Donald Trump and the Republicans will not be fully estimated until May. This may be negative for the dollar, because an extended period of uncertainty may decrease optimism or withhold investments. However, there is more time for both the presidential and the republican projects to become more consistent, especially regarding the entrepreneur taxes, as well as the Border Tax Adjustment.

Recent suggestions from the American president indicate that his today’s testimony will mostly consist of economic matters. We should also expect a confirmation of fulfilling the election campaign promises. This may support the dollar in the short-term. However, the lack of significant details in the initial budget project may cause that the return to the strongest appreciation trend may be difficult.

Higher profitability

Yesterday, the profitability of the US two-year treasury bonds increased by 5 base case points and returned to the level of 1.20%. This suggests increasing chances for a more rapid monetary tightening. However, we shouldn’t relate this growth with the announcements from Donald Trump or the White House’s press conference.

Robert Kaplan’s testimony overlapped these moves. Even though this neutral FOMC representative (with the right to vote) sounded relatively hawkish, he has recently been making many testimonies. Moreover, the one from yesterday didn’t contain anything that would differ it from his previous suggestions.

A relatively intense reaction of the market may suggest that investors are quite nervous. This may also be a certain hint before Donald Trump’s testimony. If the American president actually focuses on emphasizing economic advantages of his plans, the market would again believe in the forthcoming plans fiscal stimulation. This would be positive for the USD, as well as the American bonds.


The Polish Central Statistical Office published the data regarding the GDP for the fourth quarter. This index increased 2.7% YoY. However, more than half of this result (1.4%) was caused by an increase in supplies, whereas the contribution of gross outlay for durable goods was negative (1.6%). If it wasn’t for the recent acceleration of the business cycle, this structure would have been disturbing. However, taking into consideration positive data, as well as improving consumer sentiment, its tone is definitely less negative.

Since Donald Trump’s testimony is scheduled for 3.00 CET, a relatively minor liquidity on the zloty may cause some chaos to a portion of moves. If the testimony from the American president is favorable, we may expect the dollar to grow to the range of 4.10-4.15 PLN. However, if it doesn’t refer significantly to the economic matters, it’s possible that the American currency will be pushed to the range of 4.00-4.05 PLN.

28 Feb 2017 12:33|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:

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Afternoon analysis 27.02.2017

27 Feb 2017 12:30

Daily analysis 27.02.2017

24 Feb 2017 15:19

Afternoon analysis 24.02.2017

24 Feb 2017 12:20

Daily analysis 24.02.2017

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