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Afternoon analysis 02.09.2015

, author:

Marcin Lipka

Due to the Chinese crisis, the zloty enforced in relation to the Asian currencies. Thanks to this, Poland can save money on importing goods from the Far East. This is a chance to decrease a huge trade deficit, which is currently more than 100 billion PLN.

The ADP with no surprises

The ADP data showing the employment situation in the private sector was close to market expectations. The US economy created 190k jobs in August with estimates around 200k. The previous month’s reading was revised downwards by a few thousand, but the changes were overall too small to create a market reaction.

As a result, investors are expected to wait for the official data from the Labour Department scheduled on Friday. The reading can either push interest rate expectations in the US forwards or backwards . Some interesting findings were revealed today by “The Wall Street Journal”. According to Deutsche Bank in 21 out of 27 payroll readings for August the final publication was by 61k higher than the first estimate. It also adds uncertainty regarding the market reaction and the Federal Reserve view on Friday's publication.

The ECB is set to be more dovish?

Investors speculate that the ECB's meeting is expected to be more dovish. Additionally, expectations on inflation and the GDP growth will be revised downwards. It is possible that the CPI may be slightly lower especially for 2016 taking into account the significant oil depreciation and slight euro appreciation.

However, regarding the GDP we should not expect a market moving decision. The ECB is not going to revise the forecast on the most recent Chinese slowdown. It is also hard to expect that Draghi may suggest to extend the QE operation or increase the asset purchase program. Even if the ECB chief really wanted to do this, he would rather wait some time and use it as an argument when the situation deteriorates markedly.

The zloty is pushed higher

In the early afternoon the EUR/PLN dropped to around the 4.23 level. It is mainly a result of global sentiment improvement. Both European and US stocks have rebounded and the indexes are rising around 1% from the previous close.

The MPC meeting didn't create much volatility. Both the statement and governor Belka comments confirmed the scenario of keeping interest rates unchanged at least till the end of 2015. The Committee was also sceptical to the widely commented negative reports on China. It confirms the scenario of the overall stabilization on the zloty.

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.

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