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Neither the decision of S & P nor mild acceptance of the results of the Italian markets helped Polish currency. PLN consistently loses against the euro. EURPLN is on the highest level since June, looking at the daily closing so bad it wasn’t since 2011.


Rejection by the Italians proposed amendments to the Constitution caused only a momentary nervousness in the financial markets. Already at the opening of the European markets on Monday, dominated positive sentiment – the euro worked back losses from the Asian session, equity markets soared. There is no doubt that the outcome of the referendum is negative, especially that the advantage of opponents was very large. However, the referendum in the UK, the US election showed clearly that short-term market reactions can be very random. Yesterday calm sentiment favored the decision of President of Italy, who asked Prime Minister Renzi to remain in office until most important issues in the country will be in order. There are signs that the next president will try to appoint a technocratic government and the country will avoid early elections.

Positive reactions did not translate, however, on the price of PLN. Polish currency admittedly gained against the dollar on the wave of growth in the EURUSD, but the EURPLN price again increased despite Friday’s decision of Standard & Poor’s. It’s worth noting that the agency rather unexpectedly raised the rating outlook from negative to stable, which should reassure foreign investors and stop the outflow of capital from the Polish bond market. It is true that we see a slight decline in profitability of 10-year-old bonds, but still the difference with German bonds remains high, which helps to explain the lack of positive response to a pair EURPLN. Pair is located in the vicinity of the peaks from January (downgrade by S & P) and June (the first reaction to Brexit), but this time the leitmotiv is global changes in the bond market. In the absence of a national impulse of a permanent nature (in the form of accelerated growth or improve of perception of the public finances) making up the looses this time will be much harder.

Saturday started with very good data from the German economy – German industry orders rose in October, up by 6.3% y/y. About 14:30 we still await data on the trade balance in the US.

dr Przemyslaw Kwiecien

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