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Franc is getting stronger (Daily analysis 17.04.2018)

17 Apr 2018 12:12|Marcin Lipka

A set of positive news from China. Positive data from the British labour market did not help the pound. The zloty remained strong despite a slight weakening around midday. The EUR/PLN pair in the range of 4.15-4.16.

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

  • 2:30 p.m.: Real estate market in the USA. Building permits (estimates: 1.32 million annualised). Housing starts (estimates: 1.27 million),
  • 2:30 p.m.: Industrial production in the US (estimates: 0.3% MOM).

Relatively good sentiment

During the first part of European trade was noticed positive sentiment on the markets. This is caused by the solid increase in indexes across the ocean and the positive news from China.

China's economy grew by 6.8% year-on-year in the Q1. Moreover, retail sales (10.1%) and industrial production (6.0%) grew markedly in March and the growth rate of private investments exceeded the one observed in the public sector. Before midday, Beijing announced that it would reduce the restrictions on foreign investment in the automotive sector. Therefore, there will be no need to create ventures to enter the local market. There will also be fewer restrictions in other branches of industry (aviation, modern technologies).

The message on China's wider opening can be perceived as a result of recent trade conflict between Washington and Beijing. Perhaps this will enable to start formal negotiations and reduce the risk of a trade war. Yesterday evening, the US Treasury announced that China had increased its US Treasury bond by the most in 5 months (8.5 billion USD to 1.18 trillion USD in February).

The relatively good market sentiment has its confirmation in the franc. The EUR/CHF breached the 1.19 level, which means that the European currency is strengthening to the Swiss currency and is close to the 1.20 level. Moreover, the franc cost 3.49 PLN, i.e. the least since December 2014.

Positive data but with limited impact on the pound

For the recent days, a clear strengthening of the British currency has been visible. This was not only a result of a weaker dollar, but sterling also increased in relation to the euro before the publication of labour data from the islands. However, despite positive readings, the pound stopped its upward trend.

The data from the United Kingdom should be viewed positively. Wages grew at a rate of 2.8% year-on-year, the fastest rate since 2015. Additionally, unemployment fell to the 4.2% level, which is the lowest reading in over 40 years. Other labour market parameters also look good. Economic activity of people aged 16-64 is at the 75.4% level, which is the highest since 1971 and by 0.9 percentage points higher than last year's reading.

Zloty remains strong

The Polish currency is still strong. In turn, the franc, which today has weakened to the lowest level since mid-January 2015, has also fallen to over three years' lows in relation to the zloty and is quoted below the 3.50 limit. So far, there are no major threats to the national currency on the horizon.

The calm trade on the zloty should also be visible in the following hours. This should not be affected by the US industrial production data or by the Fed's statements scheduled for this afternoon. Maintaining most of the recent zloty's growths can now be considered a core scenario.

17 Apr 2018 12:12|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:

16 Apr 2018 13:12

Zloty remains stable (Daily analysis 16.04.2018)

13 Apr 2018 12:53

Stabilisation (Daily analysis 13.04.2018)

12 Apr 2018 13:20

Slight stronger dollar (Daily analysis 12.04.2018)

11 Apr 2018 16:12

Inflation reaches its highs (Afternoon analysis 11.04.2018)

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