Global Recovery Lifts Poland and Israel

While the Asian recovery story is front and center today, with the slew of Chinese data, including the nearly doubling of its monthly trade surplus, and Japanese machinery orders showing more than twice the expected rise, following favorable trade news on Tuesday, trade data from Poland and Israel provides additional evidence of the synchronized global recovery.

The Polish zloty is among the best performing emerging market currencies today, though local participation was limited by the Polish public holiday. Its 1.5% rise against the US dollar was helped not only by the greenback's weakness but also by news late yesterday that Poland's current account deficit in September was 1/10 of the market forecast and half of the August shortfall. The Sept deficit came in at 57 mln euros, from 124 mln euro in August and a news wire consensus was for a 565 mln euro deficit. The trade deficit itself narrowed to a mere 4 mln euros from a revised 348 mln euro deficit in Aug (initially reported at -481 mln euros).

At the end of the week Poland reports Oct CPI figures. A 0.2% rise is expected after a flat reading in Sept, but due to the base effect (last Oct CPI rose 0.4%), the year-over-year rate may ease to 3.2% from 3.4%.

The euro may be near the highs for the year against the dollar, but it is approach the year's low against the zloty. Today the euro is at its lowest level since mid-Sept. We look for the euro to move toward the Aug low below PLN6.07 in the coming weeks.

The dollar has recorded new lows against the zloty today. A break of PLN2.74 opens may be significant as the next important chart points aren't seen until closet to PLN2.50.

For its part, Israel reported its first trade surplus since at least 2005. Exports rose a seasonally adjusted 6.8% in the month of October, while seasonally adjusted imports fell 4.8%. Details are not immediately available, but the Israeli shekel is strengthened about 0.6%, with the dollar testing the 20-day moving average near ILS3.74. A break of ILS3.73 would raise the prospect of a return to the low of the year set in mid-Oct near ILS3.68.