The zloty remains weak (Daily analysis 16.03.2018)

16.03.2018 13:15|Marcin Lipka

The dollar strengthened from yesterday’s afternoon.The Eurostat readings show how economic performance differs between the single currency area countries. The zloty remains stable but weak after data from the domestic job market. The EUR/PLN is traded in a 4.21-4.22 range.

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

  • 14.00: Current account balance in January for Poland (survey: 966 millions euro),
  • 14.00: Core inflation in February for Poland (survey: 1,0% y/y),
  • 14.15: The US industrial production in February (survey: +0.4% m/m),
  • 15.00: The US consumer confidence data for March (survey: 99,3 points).

The Dollar is slightly higher

The US currency is marginally stronger comparing to the yesterday’s valuations, but the moves on the EUR/USD remain in a fairly narrow range. The dollar was probably supported by some comments from the new President Trump’s economic advisor. Despite the fact that they were aired almost two days ago, the market might have needed some more time to digest it and contrast them to earlier suggestions from the administration.

Larry Kudlow told CNBC that “a great country needs a strong currency”. He also added that “I have no reason to believe [President Trump] doesn’t favor a sound and strong and steady dollar” Moreover the dollar was also probably supported by an average market sentiment. Still, the moves seem to be limited, and investors are rather getting ready for the next week Federal Reserve meeting.

Uneven economic expansions in the eurozone

The Eurostat published final inflation data for the common currency area. The price pressure remains very limited with the HICP reading at 1,1 y/y in February. The core was reported at 1.0% y/y. These are still strong arguments to keep the monetary policy loose for the single currency region.

Inflation data shows how different economic cycle may be observed in particular regions. The HICP in Estonia or Lithuania is high, at 3,2% y/y what may suggest that these economic are close to overheating. On the other hand in Cyrus prices are falling at 0.4% while in Italy they are rising only at 0,5% y/y.

The different economic situation is also observed when we compare data on wages. Both in Lithuania and Estonia earnings rose at 7-8% y/y i Q4 while in Italy they dropped by 0,4% y/y. It also shows that running single monetary policy in the eurozone may be challenging.

The zloty remains weak

The EUR/PLN is traded in a 4,21-4,22 range. The Polish currency remains fairly weak due to internal factors (comments from the MPC, low inflation, the deficit in the merchandise trade balance). If external impulses turn toward less favorable, the PLN may lose more value.

In the afternoon a series of the US readings are expected (industrial production, consumer confidence index). They should not create significant market turbulence. Moreover, the NBP is scheduled to publish core inflation data from Poland (probably below 1,0% y/y) and balance of payments. The core CPI is may be fairly easy estimated after the broader price index data publication. Additionally, the GUS has already published the trade data so concerning the NBP publication should not also be a huge surprise. As a result, the zloty is expected to be weak, but the recent slide will not be extended.


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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:

15 Mar 2018 15:45

Zloty under pressure (Afternoon analysis 15.03.2018)

14 Mar 2018 14:44

No major changes (Afternoon analysis 14.03.2018)

14 Mar 2018 12:41

Politics in the spotlight (Daily analysis 14.03.2018)

13 Mar 2018 15:39

Inflation didn’t surprise (Afternoon analysis 13.03.2018)

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