Afternoon analysis 10.05.2016

, Autor:

Piotr Lonczak

A broad improvement of the market sentiment. This time the eurozone reports missed the expectations. The zloty did not exploit better market sentiment to gain. The Polish currency stayed at the low level.

On Tuesday the market sentiment improved. Gains were prevailing in the European markets. Still, the scale of gains was rather subdued. Moreover, the futures contracts for the US indexes suggested a good session.

The market sentiment was not affected by the reports concerning the European countries. Once against, the data from industry disappointed. In Germany production missed the forecast. It dropped 1.3 percent on a monthly basis against the 0.3 percent forecast. Also data from France missed the expectations. Production in the second largest eurozone economy dropped 0.3 percent against the positive 0.5 percent forecast.

In contrast, the data on the German balance of payments surprised positively. In March the current account surplus stood at 30.4 billion euros - the highest level in history. In addition, the trade surplus (goods and services) increased to 26 billion euros, also on record. The report suggests an expansion on high level.

Greece with a chance for debt relief

Moreover, the latest news concerning Greece positively influenced the market sentiment. Information agencies said the IMF and the Eurogroup narrowed differences on the debt relief issue. Although there is no discussion on a nominal debt reduction, there are speculations about the possibility of other form of relief.

The latest rumors suggest the problem may be resolved before the June ECB payment. In the next month Greece is expected to repay 3.5 billion euros. It would not be able to meet the obligation without additional support. Comments form Germany's Finance Minister Wolfgang Schaeuble suggest higher probability for an agreement. He until then, had been against a similar solution.

On Tuesday the EUR/USD was steady, little below yesterday's close. The major currency pair hovered above 1.1370.

Chinese inflation

Inflation in China met analysts' expectations. In April consumer prices increased 2.3 percent on a yearly basis against the 2.4 percent that was forecast. Producer's prices dropped 3.4 percent. It was a result better that the expected negative 3.8 percent.

The report was a somewhat relief after yesterday's data on international trade. The report showed a drop in the trade turnover - a sign of further slowdown in the economy. As a result, the commodities dropped on Monday. But the situation has changed today, especially in the case of copper. Still, the commodity currencies did not exploit the situation, and the Russian rubble exceeded losses.

Weak zloty

On Tuesday the zloty stabilized on the low level. The Polish currency remained under the pressure of political risk before the Moody's agency decides on the nation's rating. The probability that the grade will be lowered is quite high. Given the situation, the chance for a stronger zloty is limited.

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