Slideshows from Turkey (Daily analysis 20.09.2018)

20.09.2018 13:12|Marcin Lipka

Positive retail data for the pound despite concerns about the lack of agreement on the Brexit. The SNB is changing very little in monetary policy. Spectacular revisions of forecasts for the Turkish economy. The euro exchange rate currently fluctuates slightly below the 4.30 PLN boundary.

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.

Brexit casts shadow on data

One of the main macroeconomic publications before midday was retail sales data from the UK. Similarly to yesterday's inflation readings, consumer activity was clearly above forecasts. Sales increased by 3.5% y/y in August (excluding fuels), with an expectation of 2.4% y/y. In addition, the upward revision also occurred in the case of July readings.

The Office for National Statistics' (ONS) statement, however, points out that the good results could have been caused by the surprisingly good weather (little rain and many hours of sunshine according to The Met Office), driving travel, home furnishings, food and alcohol purchases. Overall, the British economy may need an earlier tightening of monetary policy than expected by the Bank of England at its August meeting (positive for the pound).

There is no good news for sterling from Salzburg, where EU leaders met. Politicians' statements show that for the time being there is no agreement on Brexit conditions (mainly the border between Northern Ireland, which belongs to Great Britain, and the Republic of Ireland which remains in the EU structures). Bloomberg also points out that the lack of success in Salzburg is a burden for Prime Minister Theresa May before the annual Tory Conference. Its leadership is increasingly being called into question (especially among supporters of a decreased link with the EU). This, too, could result in even earlier elections to the British House of Commons (negative news for sterling).

Switzerland does not suggest any changes

Against market speculation, none of the key elements of the Swiss National Bank's (SBN) monetary policy has been changed. Monetary authorities still believe that the franc is "highly valued" and this statement has not changed in the last quarter despite the fact that the SBN pointed out that the Helvetic currency has recently strengthened strongly.

As a result, the impact of the SBN meeting on the EUR/CHF exchange rate was marginal and after a brief depreciation of the Swiss currency, its quotations returned to around 1.1300. It appears that the key to the weaker Swiss franc condition remains the improvement of the political and economic situation in the eurozone (for both Italy and the Brexit context) and the reduction of trade tensions between the US and China.

Turkish slideshows

The Turkish authorities are finally starting to accept the reality around the country. This is best illustrated by the slideshow inflation projections published by Bloomberg. Currently, the Ministry of Finance expects that the price increase this year will amount to 20.8% (previously it was estimated at only 7%). In the next two years, inflation will reach 15.9% and 9.8% (in the previous forecast it was 6% and 5% respectively).

After the conference in the Ministry of Finance, the Financial Times also wrote that "budget cuts of about 10 billion USD are planned". All the time, the key economic index, i.e. GDP, seems to be too optimistic (growth of 2.3% in 2019). The recession is much more likely, especially given the increasingly restrictive approach of the central bank and cuts in infrastructure spending. In general, the lira has strengthened slightly to the dollar due to the expectations closer to realism from the Ministry of Finance led by the son-in-law of President Erdogan.

Still without significant changes

Small global changes in currencies are also favourable for the zloty. The euro still costs slightly less than 4.30 PLN. Minor movements are also observed on the Swiss franc. On the other hand, the pound is stronger, which is also appreciating in the global market due to better than expected retail sales data from the United Kingdom.

Still, the baseline scenario is a broad stabilization of the zloty. There are no strong external signals in the coming days and it seems that investors will wait for the outcome of the Federal Reserve meeting (next Wednesday).


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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 the written permission from Cinkciarz.pl Sp. z o.o is prohibited.

See also:

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