Afternoon analysis 29.12.2016

Today’s data showed that goods trade deficit in the U.S. in November was the highest in over a year; initial jobless claims close to market consensus. The Polish currency has been weakening together with the Hungarian forint.

Weak goods trade balance data and initial jobless claims with much impact on the dollar

The Census Bureau shared today a report regarding the goods trade balance in the U.S. economy in November that showed a deficit of 65.3 bn dol., worse than the expected 61.6 bn dol. This happened to be also the biggest deficit since August 2015. The export of goods fell (by 1.2 bn dol.) yet another month in a row, while the import rose by 2.2 bn dol.

The export of capital goods decreased (in relation to October) by far by the biggest margin – it dropped 1.8 bn dol. However, the export of industrial supplies picked up by 1.2 bn dol. This category of goods also saw the biggest rise in imports – by 2 bn dol., which was the main driver for the overall import growth in November (other categories noted only slight changes).

The U.S. Department of Labour published also today data regarding last week’s initial jobless claims. A reading of 265k was close to market expectations of 264k and 10k less than what was noted in the report from the previous week. The 4-week moving average fell to 263k and this was the 95th consecutive week of initial jobless claims below 300k. It’s worth mentioning that jobless claims are still close to record lows seen at the beginning of November.

The aforementioned data had relatively little impact on the dollar. After yesterday’s fall of EUR/USD below the 1.04 level, today this pair climbed to 1.0480 and fell afterwards to around 1.0450. This was the level around which the pair oscillated during the last few days of trading. There are no important events until the end of the year that could cause a significant change in the dollar’s value. As such, we could expect the main pair EUR/USD to trade in the range observed in the recent days, i.e. 1.04 – 1.05.

Zloty loses ground yet again

Despite a seemingly good situation for the zloty (a slightly weaker dollar), the Polish currency has lost value yet another day. Although in relation to the Hungarian forint it gained about 0.4%, it was caused mainly because the forint depreciated as well. The EUR/PLN pair didn’t test the 4.40 boundary today but rose to even 4.42 instead. The zloty also gave up value in relation to the Swiss franc – the CHF/PLN pair rose to nearly 4.13 and the closing price of 22nd December.

Tomorrow’s preview

At 2 p.m. The Central Statistical Office will publish data regarding the CPI inflation. Since July 2014 there has been deflation in the Polish economy. However, it’s started to gradually decrease since March 2015 – in November (this year) the CPI index was unchanged for the first time in the aforementioned period. The median of expectations points to a 0.4% YoY (and 0.1% MoM) inflation in December (preliminary reading). It will most probably be the end of deflation in Poland that has been present in the Polish economy for nearly two and half years. In theory, it’s good news for the Polish currency, although, the chairman of The Monetary Policy Council (and chief of the Polish central bank at the same time) has repeated a few times already they don’t expect to raise interest rates before the beginning of 2018. In order to induce a positive impact on the zloty, tomorrow’s CPI data would have to significantly exceed expectations.

Just after the opening bell for the NYSE, MNI will present at 3.45 p.m. a December PMI manufacturing report for the region of Chicago. In October the index was at 50.6, however, it spiked to 57.2 in November exceed expectations of 52.0 - it was the highest level seen since January 2015. It coincided with the overall positive trend observed across the board after the U.S. elections. The market consensus points to the index to maintain its high level, albeit slightly lowering to 57.0. The dollar has been trading quite volatile in the recent days, so the aforementioned report could spark more fluctuations should the report deviate from expectations.

Baker Hughes will report the rig count in the U.S. in the past week. The last week’s report showed 523 active rigs - the highest number yet in 2016 (at the end of December 2015 their number was 536). As the prices of oil are rising, the production in the U.S. is going to be more and more profitable and their count will most probably rise. However, their higher number (and the higher level of production in effect) bring about a downward pressure on the “black gold” prices. It should be limited for the time being, though, as the positive sentiment associated with oil production cuts (among OPEC and non-OPEC countries) is currently dominating the market.