Afternoon analysis 10.08.2017

10.08.2017 14:59|Bartosz Grejner

Slightly worse than expected data has withheld the dollar's appreciation. The Polish currency has continued to incur losses, however, the range of depreciation has not extended.

EUR/USD pair still above 1.17

Today, the US Department of Labor has released a weekly report on initial jobless claims. The number of insured unemployment has been the most positive aspect due to its fall to 1.951 million, 16 thousand less than in the previous month. However, the number of initial jobless claims has increased from 240k to 244k (4k above expectations).

The changes, in comparison to the consensus, in the aforementioned report have been relatively small, therefore, it is most likely that market attention has been focused on the Bureau of Labour Statistics (BLS) publication on July's price growth pace among US producers. The producer inflation index (PPI) has decreased from 2% YOY to 1.9%, against expectations of 2.2%. The headline inflation of PPI has also been worse than expected, it has dropped down from 1.9% in June to 1.8% in July, while consensus has been 0.3 percentage points higher.

The PPI report has broken the streak of the positive surprise for US data, after better than expected inflation and labour market readings (both, from the previous and this week). However, the reaction to the dollar has been relatively limited. There may be greater price movements in the afternoon when US investors will be more active. However, the fluctuations of the dollar may not be significant due to the market awaiting tomorrow's consumer inflation reading (CPI).

Zloty in worse condition

The deterioration of the geopolitical situation resulting in further declines in the European markets and the outflow of assets perceived as a "safe haven" have had a negative impact on the zloty. This has affected the relation between EUR/PLN, which has reached the highest level in just over three months (approx. 4,275).

The Polish currency has lost in relation to most of the main currencies, including the dollar, the franc and the pound. The zloty's level of depreciation today, however, has been limited. Most of the worse than expected US data that has been released today could have saved the zloty from significant losses. However, in the case of continued high uncertainty in the market, the Polish currency may continue to lose value.

Tomorrow's preview

At 2.00 p.m., the Polish Central Statistical Office (GUS) will publish July's final consumer inflation data (CPI) in Poland.

Its preliminary reading has pointed to an increase of 1.7% which was in line with expectations, compared to 1.5% in the previous month. This will be the second reading, therefore the chances of its significant deviation from the initial data, and hence the influence is limited.

At the same time, the National Bank of Poland (NBP) will publish June's current account data, which after a record high in January (+ 2.5bn) had recorded a deficit in the next four months. The median of market expectations has indicated an increase in the deficit to €696m (vs. €179m in May). Information from the current account on the inflow of EU funds may prove crucial, as it may give hints at the level of industrial output in the coming months.

Half an hour later, the Bureau of Labor Statistics (BLS) will present a report on July's consumer inflation data (CPI) in the US. The headline inflation as well as the core index (excluding energy and food prices), have been gradually declining in recent months, contributing to the drop in the value of the US currency. A little over a week ago, June's PCE inflation data was published, which turned out to be better than expected - the core index has risen 0.1 percentage point up to 1.5%.

Tomorrow's publication has probably been the most important information scheduled for this week. Therefore, it may significantly increase the doll ar’s volatility. After good PCE inflation data and solid labour market readings, a reading CPI data in line with consensus (1.7% for the core index and 1.8% for the headline inflation) may disappoint some investors.

On the other hand, if the price growth appeared better than expected, it might confirm the market belief of a better condition of the US economy and significantly strengthen the dollar

 


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This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without the written permission from Cinkciarz.pl Sp. z o.o is prohibited.

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