Yesterday’s Purchasing Managers’ Index (PMI) numbers revealed a slight improvement in industrial sentiment for August across most countries, although still remaining below the 50-point threshold. Additionally, Turkey’s second-quarter GDP report came in lower than expected, signaling a weakening momentum in the country’s economy, according to ING’s FX strategist Frantisek Taborsky.
Market Update: Post-US Holiday Activity
Following the US holiday, markets are back in full swing. Today, Hungary released its 2Q GDP breakdown, while later we anticipate second-quarter wages data from the Czech Republic. The Czech National Bank (CNB) expects wages to rise by 4.6%, slightly higher than market expectations of 4.2%. This data release could potentially bring volatility to the current stable market levels.
Furthermore, in Turkey, we anticipate a decrease in inflation from 61.8% to 51.8% year-over-year, in line with market consensus. This drop is attributed to the base effect and weaker food price growth. With market activity resuming after the holiday, we maintain a positive bias towards Central and Eastern European (CEE) currencies.
“PLN saw the biggest gains within the region as rates continue to rise ahead of the upcoming National Bank of Poland meeting. We remain bullish on PLN and anticipate further gains, while EUR/USD has shown signs of reversal, lessening the negative impact from previous days. As a result, we are optimistic about both PLN and CZK, with expectations for EUR/CZK to dip below 25.00,” noted Taborsky.
Analysis and Conclusion
Overall, the global market sentiment is showing signs of improvement, with PMI numbers indicating a positive trend. However, Turkey’s GDP report highlights concerns about weakening economic momentum. Central and Eastern European currencies are expected to perform well, particularly PLN and CZK, as market activity resumes post-US holiday. Investors should keep a close eye on upcoming data releases and central bank meetings to make informed decisions about their investments.