Afternoon analysis 10.10.2016:
The data from the German economy, as well as from the euro zone, was better than estimated. Another week of volatility regarding oil is ahead of the market. No larger changes on the Polish currency at the beginning of the week.
Positive sentiments in Europe
Today’s data from Destatis showed the highest level of the German trade balance since May 2015 (22.2 billion euro in September vs 19.4 billion euro the month before). This was mostly caused by an increasing export. Even though import quoted its highest increase (3%) since October 2015, a 5.4% increase of export decided of the trade balance’s better result. It’s worth emphasizing that export’s growth in month on month relation was the highest since October 2014.
At 10.30 AM, Sentix published the index of investors trust for the euro zone economies and Germany, among others. The Sentix index for the euro zone was at the level of 8.5 (the highest since May) and the index of investors’ expectations towards the euro zone economy appeared to be the highest since December 2015 (10.4).
The German economy quoted even better results of the Sentix indexes. The main investors’ trust index was at the level of 27.7. This was its highest level since May 2015. On the other hand, investors and analysts find the situation of the German economy as the best since March 2015. The latest Sentix data combined with the trade balance data, as well as the Ifo data for September, confirm a very positive condition of the German economy.
In the long-term perspective, this is a positive information for the euro. This is because it may support the European currency’s appreciation. However, the euro’s evaluation is more determined by the market speculations regarding rate hikes in the USA, as well as the presidential election, for the time being.
Situation on zloty
During the second part of the day, quotations of the zloty remained basically the same as they were this morning and at the end of Friday. The Mexican peso remains the strongest against the zloty. It strengthened by more than 2% due to the second presidential debate in the USA yesterday.
Due to a slightly stronger dollar, the USD/PLN went up to the level of 3.84 today. The minutes from the previous meeting of the Federal Reserve (September 20 – 21) will potentially have a largest impact on the USD/PLN. Investors will make attempts to find clues regarding the possible direction of the Fed at its forthcoming meetings (November, December).
23rd World Energy Council
The 23rd World Energy Council will occur in Istanbul between October 9 and October 13. The market mainly expect an information regarding a potential agreement between the OPEC Cartel and the countries that are outside of OPEC (mainly Russia).
According to Bloomberg, the Russian Minister of Energy, Alexander Novak, claimed on Sunday that he doesn’t expect an agreement regarding participation in the OPEC oil supply control program. Today, according to Reuters Novak said that Russia would consider the offer of a decrease in oil’s production, if the Cartel would make such an offer. However, he emphasized that Russia would rather to freeze its production, instead of decreasing it. This information has been confirmed by President Vladimir Putin. According to Bloomberg, he said that Russia is ready to join the agreement.
The possible decision from Russia is mostly dependent on the OPEC decisions. The market doesn’t expect the agreement to be made this week. However, last month’s forum in Algiers showed that we may expect the statements from politicians to impact oil prices. For example, Putin’s statement cause the WTI to increase yet again by more than 50 dollars per barrel today.
At 10.00 AM, the International Energy Agency (IEA) will publish its monthly report regarding the oil market. Investors will focus on this report regarding the agreement between the OPEC countries, which was made last month in Algiers (the agreement regarded freezing the level of oil mining by particular countries.) Historical interpretation shows that even though the report may cause larger fluctuations of oil, eventually, it should have a minor impact on oil price. The 171st meeting of the OPEC countries will be held on November 30 in Vienna. Investors expect the agreement from Algiers to be completed, as well as more details regarding its conditions.
At 11.00 AM, we will know the ZEW institute’s indexes regarding the sentiment in the German economy, as well as in the euro zone, for October. The market consensus assumes the sentiment in Germany to be better than it was in September (4.0 vs 0.5). This is very likely to happen, because a better global sentiment is confirmed by the recent PMI readings. A positive reading for the German economy should also have a positive impact on the sentiment of the entire euro zone. The market consensus assumes the ZEW index to grow from 5.4 in September to 6.3 in October.
At 14.00 (2.00 PM), we will know the final CPI data from the Polish Central Statistical Office for September. A quick estimation of the index from September 30 showed no changes in comparison to August, as well as that inflation decreased by 0.5% in comparison to September 2015. Even though we can’t expect large differences, even a slightly higher inflation is very unlikely to impact the zloty’s appreciation. During the press conference after the recent Monetary Policy Council’s meeting, chairman Glapiński indicated that rate hikes will most likely occur at the beginning of 2018 (interest rates in Poland are currently at the level of 1.5%.)
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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