The start of the week is marked by a lack of appetite for risk. Retail sales in Poland significantly lower than forecasts. Is this another sign of deterioration in the economy? The US dollar bounces back from support at 1.0810 against the euro.
Risk Off
The next week of October begins with poor moods in the markets, and the dominant scenario is risk off. This can be seen particularly in the falling sessions in the USA, and in today’s session on the German Dax, which is losing 0.35%. It is no different with our local stock market – WIG20 is losing nearly 1% today. Attention is also drawn to the rising gold prices, which are close to breaking out to a new all-time high, beyond the 2740 level. Since we are discussing risk off, it’s not surprising for the situation with the PLN, which is losing to major currencies. In the case of EUR/PLN, we have risen above 4.32, and with USD/PLN, we are dangerously “flirting” with key resistance at 4.00.
Consumer Weakens
When it comes to the Polish economy, another disappointment appeared today, this time from the traditionally strong consumer side. Retail sales for September turned out to be a major disappointment at -2.2%, with expectations at 2.1%. This is also a significant decline compared to August when it was 3.2%. We are therefore seeing another symptom of the worsening economic situation in our country, after yesterday’s decline in industrial production and lower wage dynamics. To some extent, this situation was expected by analysts. The reasons? Economic problems of our largest trading partner, Germany, which is facing recessionary climates. A decrease in orders had to find its reflection in our economy. The key now is how the eurozone locomotive will cope with the troubles. Certainly, the effects of the ECB’s rate cuts will need to wait a few months.
What About USD
The rising US dollar is certainly to blame for the risk off in the markets. The beginning of the week, in relation to the euro, was marked by a test of support, which constituted last Thursday’s minimum around 1.0810. For now, the attempt to overcome it has ended in failure and there has been a slight rebound upwards. However, we still have the scenario of redefining the monetary policies of the Fed and ECB, which benefits USD. This is about changing to a more cautious approach to further rate cuts by American policymakers. And the opposite situation, namely the need for faster easing by European policymakers in the face of economic troubles in the eurozone. To this is added the question to the plus for the US dollar – polls indicating a greater likelihood of Trump winning the presidential elections. Although the Republican candidate has the advantage, the race is still undecided. However, the fact that the Democratic candidate has not had a good few days is undeniable. Be that as it may, the time until November 5th will be nervous, and the next polls presented can overturn the situation on the FX market. Today in the calendar, besides the appearances of Fed members, a decision by the Hungarian bank on interest rates. Analysts agree that nothing will change, which should support HUF.
Author: Krzysztof Pawlak, currency analyst at Walutomat.pl
Source: https://ceo.com.pl/rozczarowanie-sprzedaza-detaliczna-w-polsce-oznaka-spowolnienia-gospodarczego-12289
