Zloty appreciates (Afternoon analysis 17.04.2019)

Solid readings from the Chinese economy support good sentiment in the market. The EUR/USD exchange rate remains within a limited fluctuation range. Tomorrow's PMI readings may increase the euro's volatility. Positive moods support the zloty despite weaker wage growth.

Franc slightly weaker

Tuesday turned out not to be a breakthrough day for the currency market. Early morning data from China confirmed the positive sentiment dominating the market, showing that GDP growth in Q1, industrial production in March and retail sales rose above expectations.

Until midday, data on the current account in the eurozone in February were also published, where the (seasonally-adjusted) surplus turned out to be 6.4 billion EUR lower than expected by economists, although the balance of trade in goods exceeded the consensus (by 5.5 billion EUR). However, it had little impact on the euro quotations today - the EUR/USD exchange rate still oscillates around the 1.13 level. Tomorrow, we can count on a more significant move around the publication of PMI indexes.

The next day of multi-month highs is marked by the largest market indexes in Europe or the USA. Virtually no changes in the main currency pair quotations accompanied by good moods on the markets is a good sign for the currencies of emerging countries (EM), including the zloty. The lower level of risk aversion caused a slight weakening of the franc.

The CHF/PLN fell today to 3.74, the lowest level since February 1st. Despite a relatively slow pace of salary growth in March in Poland (5.7% year-on-year compared to expectations of 7.2%), the zloty's basket slightly strengthened due to external factors. The EUR/PLN exchange rate moved around 4.27, and by tomorrow the changes will probably be very limited. Tomorrow, data from the Polish economy and the mentioned PMI from the eurozone will be important for the zloty. Their positive agreement could further strengthen the Polish currency.

Tomorrow's preview

Tomorrow, before midday, the data that can set the sentiment in the market for the rest of the day and perhaps even the week will be published. IHS Markit will publish preliminary PMI data for the industrial and services sectors for France (9:15 a.m.), Germany (9:30 a.m.) and the eurozone (10:00 a.m.). The most important for the market will be the readings of industry, which recently recorded terrible results - PMI indexes for the aforementioned economies fell below 50 points, indicating a decline in activity in the sector. The median market expectations point to a slight increase in the industry's indexes (by 0.4-0.9 pts.), and if the data do not disappoint or even slightly exceed expectations, the euro may gain with the current positive sentiment in the market.

At 10:00 a.m., the Polish Central Statistical Office (GUS) will publish data on industrial production in Poland in March. Today's data on wages have failed expectations, but they have had a limited impact with positive moods on the broader market. If the production data also turn out to be worse than expected (consensus: +4.2% year-on-year), the zloty may feel more supply pressure, although this depends mainly on sentiment on the global market.

In the afternoon, retail sales data in the USA will also be announced for March. The median of expectations assumes an increase of 0.7% on a monthly basis. These data may have a limited impact on dollar quotations if they do not deviate significantly from the consensus, given the good sentiment associated with Chinese data and tomorrow's PMI readings.