POLAND: S&P Manufacturing PMI Drops Into Contraction, Final Q1 GDP On Tap
Jun-02 07:30
- Polish assets are under pressure in reaction to the electoral victory of Karol Nawrocki, who ran with the support of the right-wing Law and Justice (PiS) party. We discussed the implications of different scenarios in our preview last week and the points raised in the document still stand. The continuation of legislative paralysis resulting from cohabitation can be considered a best-case scenario for the incumbent government, with most expecting Nawrocki to adopt a more confrontational approach. His election may also complicate coherent decision-making in the foreign policy space. Over the course of the election campaign, Nawrocki ruled out Ukraine's admission to NATO, the deployment of Polish troops to Ukraine or the ratification of any expansion of EU prerogatives, repeatedly criticised the current condition of the EU and signalled his support for the Trump administration.
- In his capacity as President, Nawrocki will be involved in appointing three out of ten members of the NBP's Monetary Policy Council and proposing a candidate for the NBP Governor to be approved by parliament. He will appoint his first MPC member later this year, as Cezary Kochalski is due to retire from the rate-setting panel. During the election campaign, Nawrocki called for interest-rate cuts, but did not show much understanding of the subject matter while answering more specific questions. This suggests that it might matter whom he picks as his economic advisers.
- Poland's S&P Global Manufacturing PMI unexpectedly fell into contraction, printing at 47.1 in May versus 50.2 prior. S&P's Economics Director Trevor Balchin wrote that 'a sharper drop in new orders impacted output, purchasing and hiring' derailed the recovery in manufacturing, resulting in the steepest fall in PMI in almost three years. According to Balchin, 'the June figures will be eagerly awaited to see if the manufacturing sector can regain momentum moving into the summer.' Elsewhere, Statistics Poland will release final Q1 GDP data at 09:00BST/10:00CEST. Preliminary data estimated growth at +4.2% Y/Y.
- In their new report on public debt, MPC's Ludwik Kotecki together with Head of CEE Economics at Citi Piotr Kalisz and Public Finances Institute's Sławomir Dudek warned that Poland is on a dangerous fiscal path and predicted that debt could reach 95% of GDP within a decade.
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USDCAD TECHS: Hits Bear Trigger, New Cycle Low
May-02 20:00
- RES 4: 1.4415 High Apr 1
- RES 3: 1.4296 High Apr 7
- RES 2: 1.4087 50-day EMA
- RES 1: 1.3906/3935 High Apr 17 / 20-day EMA
- PRICE: 1.3793 @ 17:00 BST May 2
- SUP 1: 1.3760 Low Apr 21 and the bear trigger
- SUP 2: 1.3744 76.4% retracement of Sep 25 ‘24 - Feb 3 bull run
- SUP 3: 1.3696 Low Oct 10 2024
- SUP 4: 1.3643 Low Oct 9 ‘24
The trend set-up in USDCAD deteriorated further Friday, with prices slipping through the bear trigger to narrow the gap with next support. The fresh cycle low reinforces the bear cycle and signals scope for a continuation near-term. Potential is seen for a move towards 1.3744, a Fibonacci retracement. Moving average studies are in a bear mode position, highlighting a dominant downtrend. First resistance to watch is 1.3943, the 20-day EMA.
AUDUSD TECHS: Consolidation Phase
May-02 19:30
- RES 4: 0.6550 61.8% retracement of the Sep 30 ‘24 - Apr 9 bear leg
- RES 3: 0.6528 High Nov 29 ‘24
- RES 2: 0.6471 High Dec 9 ‘24
- RES 1: 0.6470 High May 2
- PRICE: 0.6445 @ 16:59 BST May 2
- SUP 1: 0.6344/6316 Low Apr 24 / 50-day EMA
- SUP 2: 0.6181 Low Apr 11
- SUP 3: 0.6116 Low Apr 10
- SUP 4: 0.5915 Low Apr 9 and key support
AUDUSD remains inside a consolidation phase, having traded either side of the 0.6400 level for 10 consecutive sessions. The underlying trend remains bullish and the pair is trading close to recent highs. Price has recently breached a key resistance at 0.6409, the Dec 9 ‘24 high. This breach reinforces bullish conditions and signals scope for a continuation higher near-term. Sights are on 0.6471 next, the Dec 9 2024 high. Initial key support to monitor is 0.6316, the 50-day EMA. A clear break of this EMA would be a concern for bulls.
US TSYS: Rates Retreat, Sentiment Improved Though Trade Risk Remains
May-02 19:24
- Treasuries look to finish near late Friday session lows after trading firmer on the open, higher than expected Nonfarm payrolls at 177k (sa, cons 138k) of which private contributed 167k (sa, cons 125k) triggered the early reversal.
- However, two-month revisions of -58k offset the 39k beat for nonfarm payrolls, with a similar story for private (a 42k surprise vs -48k two-month revision).
- Stocks are back near four week highs - pre-"Liberation Day" levels as hopes of some trade deal being made improved sentiment.
- The Wall Street Journal reports that "Beijing is considering ways to address the Trump administration’s gripes over China’s role in the fentanyl trade... potentially offering an off-ramp from hostilities to allow for trade talks to start." The Journal notes that "discussions remain fluid" and China "would like to see some softening of stance from President Trump".
- Currently, the Jun'25 10Y contract trades -20 at 111-07.5 vs 111-02 low -- initial technical support (50-dma) followed by 110-16.5/109-08 (Low Apr 22 / 11 and the bear trigger). Curves bear flattened, 2s10s -3.480 at 48.002, 5s30s -4.911 at 86.807.
