China on Friday!
Every history enthusiast will confirm that communist parties have a weakness for the number 5. China cultivates this tradition also in the 21st century, the best example of which is the fact that this year the 15th Five-Year Plan has already come into force. Further confirmations can be found in today’s quite generous macro data package.
China’s economy was expected to grow at a rate of… equal to 5%, which surpassed market consensus. March industrial production on an annual basis was also better than forecasts and amounted to… 5.7%. Unfortunately, the unemployment rate, which rose to… 5.4%, was also higher than forecasts and was the highest figure in over a year.
It is not unlikely that a poorer picture of the labour market translated into weaker consumer strength, because retail sales last month were clearly worse than expected (+1.7% YoY, instead of +2.4%). Not determining the degree of confidence in Chinese macro data, one can infer from the above package that the second largest economy in the world (despite some flaws) remained resilient even in increasingly chaotic geopolitical circumstances and rising trade tensions.
The publications had no noticeable impact on forex, where the CNY and most FX remain under the influence of the dollar correction.
On USD/CNY this correction only temporarily stops the already more than yearly trend of strengthening the Chinese currency. The dollar to yuan rate rebounded from 6.8 CNY, which is above the 3‑year lows. In the case of the CNY/PLN rate this translated into a return to around 0.528 PLN.
Time for correction or time for acceleration?
The Wednesday session looks like an excellent moment for a correction of recent sharp movements. And at least that is how it looks on forex, where the heavily turbulent dollar in recent days began to defend itself.
The EUR/USD rate reversed after testing the 1.18 USD area. Of course, such a “green” behaviour is a perfect pretext for (at least temporarily) limiting positions in the already heavily purchased EM currencies in April. And that also hits the Polish zloty today.
In this way the euro rate returned above 4.24 PLN, and the dollar rate is again 3.60 PLN. The hesitation of the currency market (which reacts much more cautiously to Middle Eastern news) in discounting the “suspension of arms” does not translate into the capital market. At least not in the main indices. During the Asian session Chinese indices performed well, but still lagged behind Tokyo, which gained almost 2.4%.
In Europe green dominates, although it does not spread evenly. London or Frankfurt rise decently +0.5%, but Madrid is barely above the line. The marauders include Warsaw, where WIG20 loses 0.7%. Wall Street contracts indicate a slightly positive opening, but before the session quarterly results (from the most prominent companies) were reported only by Pepsico (quite positive). Only after the market closes will we know the results of today’s star, i.e. Netflix (and everything right after the failed attempt to acquire Warner Bros.).
A slight uptick is seen in oil pricing, but it looks more like gathering strength before continuing declines, and Brent is traded just below 96 USD per barrel. In the debt market, yields are falling, and Polish 10‑year bonds test from above 5.5%. Investors remain resilient to increasingly loud warnings from institutions such as the IMF or the World Bank about the long‑term effects of the Middle Eastern conflict. The end of this war is supposed to be the beginning of a new wonderful world (probably under AI leadership, as confirmed by the results of TSMC). The global MSCI All‑Country World Index reached a record level after 10 consecutive rising sessions.
