16th August 2004
Thursday, September 2nd, 2010
Currency Report
The current account data published last week turned out to be surprisingly good, with a balance surplus and a 30 percent rise in exports year-on-year.
The data triggered some appreciation of the zloty. Our currency was also helped by the Finance Ministry's comments regarding increasing chances of a shrinking state budget deficit during this year. The zloty finished the week weaker anyway. On Thursday and Friday the zloty suffered from information from South Africa, where interest rates were lowered, sending both the rand and other emerging currency markets down.
The upcoming days will once again bring important macro figures regarding the Polish economy. On Monday, the July CPI will be published. Its rise is almost a sure bet, the only question being how big the move was. The median forecast is 4.7 percent year-on-year, but in my opinion it may be a little bit higher. Everybody agrees that the reason for higher prices was the food market situation. Last year prices went down significantly in the first month of the summer holidays. This year the situation was different - the holidays were postponed.
It is worth noting that Polish food is very attractive to foreign traders, who keep its price at a high level. The remaining elements of the CPI basket, especially those related to demand, should remain stable. The impact of rising oil prices on international markets should be offset by the stronger zloty. Apart from that, the biggest increase in oil prices took place in late July, so it will not affect July's CPI. We may assume that the CPI increase will send CPI expectations higher as well and may result in another interest rate hike. I assume that the hike will happen in August, by as much as 50 basis points.
This week's industrial output figures are expected to rise by almost 12 percent year-on-year. If July's industrial output rises by 12 percent or faster it will be proof of momentum in the country's economy. On the other hand, PPI should be lower than June data (9.2 percent year-on-year) thanks to cheaper raw materials (with the exception of oil). The last one will be retail sales, which is expected to be around 10 percent year-on-year - a bit better than a month ago.
If analysts' expectations are correct, then the fundamentals of our economy are solid and interest rates are likely to rise. Should this situation occur, so the zloty should appreciate.
By Marek Zuber
chief economist TMS
Supplied by Treasury Management Systems
www.tms.pl
From Warsaw Business Journal
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