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Afternoon analysis 25.02.2016

, author:

Piotr Lonczak

US reports supported the dollar. Data on private credit in the euro zone increased the probability of more stimulus from the ECB. The zloty exploited sentiment improvement in the broad market.

The European Central Bank published data on the money supply. The broadest money aggregate M3, increased more than anticipated. It grew 5 percent against the 4.7 percent forecast. In the prior month, it increased to 4.7 percent.

The most important part of the ECB report was the data on credit for the private sector. It was worse than the forecast. Credit for households increased 1.4 percent against the 1.5 percent forecast. It grew 1.4 percent in the preceding month. The consumption credit growth increased to 4 percent against 3.8 percent in the preceding period. Credit for non-financial companies increased 0.6 percent against 0.1 percent in the prior month. It reflects strong risk aversion among companies. It also shows weak investment activity.

In the beginning of 2015, the ECB managed to support credit action. The credit started to growth after more than two years of declines, as the ECB has loosened its policy since mid-2014. All in all, the credit demand is still subdued.

Today's report has given more arguments to the dovish part of the ECB. However, Mario Draghi may have problems with fulfilling its declarations. Yesterday, Bundesbank President Jens Weidmann argued against more stimulus from the ECB. The German central bank president said the euro zone economy is getting better, and more stimulus may result in negative side effects.

The Eurostat showed the final report on inflation. The HICP inflation rate stood at 0.3 percent against 0.2 percent in the prior month. It was a lower result than the forecast. In contrast, the core inflation rate grew to 1 percent from 0.8 percent in the prior month. The ECB inflation target is less 2 percent. Given the situation, inflation reports support the case for more easing.

The US reports

The number of unemployment claims increased to 272k – which is a slightly higher result than was projected. Last week, the number stood at 262k. The report shows an ongoing expansion in the US labor market.

The data on durable goods orders was better than the forecast. It increased 4.9 percent against 2.5 percent. The report, after excluding transportation equipment, showed a 1.8 percent increased against the 0.2 percent forecast. The data may suggest improvement in manufacturing sector. Today's data mitigates yesterday's negative data from the service sector.

Today's data from the US and the eurozone resulted in a drop of the EUR/USD. It dropped to 1.10 from today's high around 1.1040.

A stronger zloty

Sentiment improvement in the broad market supported the zloty. The Polish currency exploited the opportunity to gain against all its major pairs. Moreover, the zloty could have been supported by a possible shift in the monetary policy in Hungary, where the central bank may cut rates. In Poland, a similar scenario is less likely. As a result, the zloty may gain against the forint.


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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