After a long wave of strengthening yesterday we saw a correction and declines in the US currency. It was derived from movements in the debt market, recently we observed a clear decline in profitability. In contrast, today in the morning we can see a slight correction after the night speech of president of the Federal Reserve, Janet Yellen. In the evening Fitch and Moody’s will announce rating upgrade for Poland so we can look forward to high volatility in PLN.
President Yellen gave the markets a fairly neutral message. She talked mostly about economic inequalities, which are an obstacle to productivity growth in the long term, as well as the differences in salary between the sexes and the labor market. In a statement the president Yellen lacked references to the current monetary policy and her outlook on interest rate hike this year. While we find a interesting fact when it comes to her speech was reference to banking regulations, including the so-called Dodd-Frank Act. Donald Trump promised deregulation of the sector and abolition of the law, while Yellen praised these solutions.
Yellen’s term of office lasts until the beginning of 2018, and Donald Trump did not speak favorably about her during the election campaign and therefore replacing the current president by someone with a more hawkish outlook seems a likely scenario. In the currency market can be seen mixed moods. The dollar index is at stable levels, USD loses a bit to EUR. We already know publication of relevant data from China.
The data on the trade balance clearly disappointed the market was expected 47.55 bln, while the balance was only 40,82 bln dollars. This is mainly due to the drop in exports by 6.1% y/y versus expectations of a decline of 4.0%. The data for November showed an increase of 1.6% y/y. This is due to a weaker yuan. Markets reacted to a greater extent, however on data regarding new loans, we observe another powerful growth data for December showed a 1.04bln CNY, with the consensus of 677mld CNY. China’s economy has stabilized. There may be a question whether China said more or really introduced measures to restrain lending and prevent a possible bubble.
In case of PLN undoubtedly event of the day will be updated Polish rating by Fitch and Moody’s. Consensus implies no change, however, Moody’s maintains rating Polish at a high level, so there is a risk of a negative decision by the agency. However, in Poland, we could see a number of factors that should not translate into a negative impact on the decision of the agency, including the reflection of the investment portfolio and a better-than-expected budgetary situation. Yesterday we had to deal with the MPC (RPP) decision, of course rates remained unchanged. MPC should not raise the rates to short-term rebound in inflation. Zloty slightly lost against the euro (-0.03% EURPLN 4.372) and Swiss franc (CHFPLN rate is 4.076, an increase of +0.03%), whereas strengthened against the USD (by 0.17%, currently USDPLN rate is 4.112) and GBP (about 0.15 % GBPPLN rate is currently 5.003).
Adam Puchalski, analyst of financial markets XTB