Daily analysis 31.01.2017

Worse sentiment among the American investors. The Bank of Japan announcement brought minor changes. Mixed data from the German economy. The zloty remains stable. The Polish GDP reading was better than expected, but its details clearly show how weak the Polish economy was in 2016.

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

• 15.00: Changes in house prices according to the S&P CoreLogic CS data (estimates: positive 5.0% YoY).
• 15.45: Chicago PMI (estimates: 55 points).
• 16.00: The Conference Board consumer trust index (estimates: 112.8 points).

USA and Japan

The worldwide financial press have been focusing recently on the events, which are related to President Donald Trump’s recent decisions. To a certain degree, this has also translated to sentiments during the American session. The American indexes quoted their worst session since October. Moreover, the dollar lost its value.

It’s very difficult to estimate the moment, in which investors will focus on economic matters. However, it’s possible it will happen on Thursday. According to CNN, on that day Trump will make his testimony regarding economy, which will include the industry related elements. If the testimony is protectionist, this may harm the dollar. However, if Trump emphasizes the necessity of lowering taxes, as well as of infrastructural investments, the American currency should gain value.

The Bank of Japan did not introduce large changes in its monetary policy. The QE level remained near 80 trillion yens per year. Moreover, the profitability of the ten-year treasury bonds still remain near 0.00%.

However, the BoJ slightly modified its macroeconomic indexes for the next two years. After these changes, the estimated economic growth is approximately 0.2 percentage points higher than it was in the forecasts from October (1.5% in 2017 and 1.1% in 2018). Moreover, inflation (excluding food) is estimated to be at the level of 1.5% in 2017 and at the level of 1.7% in 2018.

The yen’s reaction to this announcement, as well as to Haruhiko Kuroda’s (the BoJ chairman) press conference, was minor. Currently, the most important information for the Japanese currency is the profitability of the American treasury bonds, changes in the American monetary policy and the general market sentiment. All other matters will most likely be marginalized.

Mixed data from Germany

This morning, we received quite weak data regarding the German retail sales for December. According to Destatis, this index was at the level of negative 1.1% YoY, while the market consensus was at the level of positive 0.5%. The real interpretation of this index for the entire 2016, was at the level of positive 1.6%.

However, the German labor market data for January was much better than expected. The unemployment index went down by 26k, which was its best result since 2011. This caused the unemployment rate to decrease by 5.9%, which was its best result since 1991.

GDP details

At 10.00 AM, the Polish Central Statistical Office (GUS), published the GDP data for 2016 (this reading did not contain the data for the fourth quarter.) Last year, the Polish economy increased 2.8%, which was 0.1% higher than estimated. However, this was the only positive information from the above mentioned reading. The YoY data shows a huge investment breakdown in 2016. Gros fixed capital went down 5.5%, which means that it took 1.1% from the final reading. The data was relatively positive only due to a very high supply contribution (1% of the GDP). If we were to eliminate this volatile, as well as impermanent factor, the Polish GDP growth would be at the level of 1.8%.

The impact of this data was limited on the zloty before noon. The Polish currency remains relatively strong and profitability of the ten-year bonds remain near 4.00%. The latter has currently been attracting the foreign capital, rather than discouraging it (just like it did in the case of larger volatility in the market, or during the discussion regarding Poland’s rating.) Therefore, if the global situation does not deteriorate, the Polish currency should remain stable.