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Radio silence (Daily analysis 11.09.2018)

11 Sept 2018 13:08|Marcin Lipka

No new information on foreign trade. Relatively good data from the British economy together with growing chances for an agreement with the EU support the pound. The zloty remains stable. Before midday, the euro exchange rate was about 4.31 PLN.

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

  • A lack of macro data may noticeably impact the analyzed currency pairs.
Foreign trade

In the morning, sentiment on the broad market deteriorated, but it was neither a question of incoming macroeconomic data nor reports on US-China trade relations. In the foreign trade context, radio silence began.

During yesterday's White House press conference, the issue of customs war with Beijing did not arise at all. There were only threads concerning relations with Canada or a new trade agreement with India, but there were no questions about China. Perhaps there was not enough time for this discussion, as half of the press briefing was devoted to the presentation of the economic successes of Donald Trump by Kevin Hasset, Chair of the Council of Economic Advisers.

The market is trying to respond positively to the lack of messages related to Chinese trade. Unfortunately, this issue remains far from being resolved and a couple of days of reduced tensions does not mean that Washington and Beijing's positions have come closer. Therefore, the basic scenario is still a clear extension of the customs conflict before there is any positive breakthrough. This should support the dollar, also taking into account the exceptional strength of the US economy compared to other developed countries.

Great Britain and ZEW

Great Britain is worth paying attention to foreign trade trends. Growing chances for an agreement with the EU support the pound sterling. Additionally, today the ONS (Office of National Statistics) published data from the labour market. Wage growth (excluding bonuses) reached the 2.9% year-on-year level in July and given the last post-crisis decade, this is one of the best results and additionally 0.1 percentage point above market estimates.

Consequently, there is a growing chance that the monetary policy in Great Britain will be tightened faster than the market expects (perhaps the next interest rate increase will take place in the Q2 of 2019). Therefore, the pound may appreciate in the following weeks, especially against the emerging market currencies (including the zloty).

The ZEW index did not have almost any influence on the general sentiment. The economic sentiment of German entrepreneurs has slightly improved, but the index is still below zero (minus 10.6 points), while the long-term average is 22.9 points. The Institute notes that the surveys were conducted at a time when the problems with Turkey and Argentina were worsening and data on industrial production and orders from Germany were surprisingly low. On the other hand, the risks associated with trade were reduced (USA-Mexico agreement), which reduced the fear a little according to prof. Achim Wambach, President of the ZEW Institute.

No strong fluctuations in zloty

During the morning trade, sentiment on the share market deteriorated, but this had little impact on the zloty. The euro still costs about 4.31 PLN. The lack of stronger global signals (silence concerning additional duties on Chinese products imported by the USA) should stabilise the zloty unless sentiment on foreign markets deteriorates drastically in the afternoon.

On the other hand, looking at the reports from the country, the data from the Polish labour market for the Q2 published by Eurostat can be perceived as very good. Over the last three quarters employment in Poland was very weak (two quarters of growth by 0.1% and one drop by 0.5%) compared to the EU. In the Q2 of this year, there was a clear rebound (by 1.2%). In year-on-year terms, the result is still unsatisfactory (0.7% year-on-year with the EU average of 1.4% year-on-year), but at least the negative trend was halted.

11 Sept 2018 13:08|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:

10 Sept 2018 16:00

Brexit becomes real? (Afternoon analysis 10.09.2018)

10 Sept 2018 13:14

Foreign trade as a big mystery (Daily analysis 10.09.2018)

7 Sept 2018 15:13

US wage surprised (Afternoon analysis 7.09.2018)

7 Sept 2018 11:44

Waiting for US decision (Daily analysis 7.09.2018)

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