Slight rebound in the eurozone industry (Daily analysis 10.01.2020)

Industry improves in the large economies of the eurozone. Production in France has grown at the fastest pace since May and in Spain since January. The US currency is gaining slightly before the publication of the report on the US labour market.

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.: Change in employment in the non-farm sector in the USA in December (estimates: 160k).
• 2:30 p.m.: Change in average hourly wages in the USA in December (estimates: 3.1% year-on-year).

The EUR/USD pair losses holiday increases

The last trading day this week was characterised by a calm tone. Market participants are already awaiting the most important economic publication of the week, the December report on the US labour market. Until midday, perhaps a little less important for current trade and fluctuations, but significant for the eurozone economy data on industrial production from its largest economies were published. It can be said that the image of the industry has improved slightly, at least in November.

Industrial production in France increased by 1.3% year-on-year, 0.9% above expectations. In terms of numbers, this does not look very impressive, but it was the fastest growth pace since May, which also reflects the scale of the slowdown in the second half of 2019. The production in Spain, whose 2.1% year-on-year growth proved to be the highest since January last year, and also 1.6 percentage points above market consensus, was even more positive. Italy's industry may not have surprised so positively, but the 0.6% year-on-year decline was in line with expectations. A positive aspect of the Italian industrial data was the monthly data - monthly production increased in November for the first time in three months (by 0.1%).

If we combine today's data with yesterday's publication of reading from German industry, which also turned out to be clearly above expectations, the end of the year for this sector in the eurozone could be positive. This is no reason for euphoria; the readings in the following months will be important to confirm this trend. The first phase of the US trade agreement with China, to be signed next week, should inject more optimism into the sector in the first phase of the year, reducing uncertainty, may also support the value of the euro in relation to major currencies.

Dollar costs over 3.83 PLN

Before the publication of data from the US labour market, the dollar remained in a relatively strong, at least in the context of recent days. The EUR/USD quotations fell to about 1.1085, the lowest level since December 26th. Therefore, practically the entire increase in the EUR/USD exchange rate has already been reversed. The scale of the dollar's appreciation was not large, it ranged from 0.1-0.2 percent, but it could expand significantly around 2:30 p.m. when the report is published.

Slightly stronger dollar has moved the USD/PLN exchange rate above 3.83 for the next day in a row, to its highest level since December 27th. However, the zloty's basket remains stable, and quotations in relation to major currencies remain in very limited ranges: the EUR/PLN approx. 4.24-4.25, the GBP/PLN pair around the key level of 5.00 and the CHF/PLN approx. 3.92. These fluctuations may increase in the afternoon when the US data are available. Still, the stable quotations of the Polish currency in the last week and good sentiment on the broader market should protect the zloty even if the dollar appreciates in response to much better than expected data from the US labour market.