Afternoon analysis 13.04.2016

, author:

Piotr Lonczak

The dollar kept its gains in spite of a weak report on retail sales. A broad improvement of the market sentiment. The zloty dropped severely in spite of supportive market sentiment.

After a prolonged period of stabilization, the EUR/USD has chosen a direction. Today the dollar gained, which resulted in a clear drop of the major currency pair. The major stock indexes gained. The factor responsible for a positive atmosphere was Chinese data.

In March, the report on international trade was better than expected. Export increased 11.5 percent against the 2.5 percent forecast. Less importantly, import dropped 13.8 percent - more than the negative 10.2 percent that was expected. Today's release was incoherent with the recent reports, which suggested improvement in the economic situation in China.

The beginning of 2016 was determined by the anxiety concerning China. However, the latest reports have showed that the situation improved significantly. This factor may support the dollar and the commodity market.

The Federal Reserve has signaled that the global situation has an impact on its policy decisions. As a result, the improvement in China may lead to an increase of the probability of interest rate hikes. Moreover, China is the world's major commodity consumer, which will support this market.

Stronger dollar

The factor that is very important for oil market developments are the expectations before the oil producing countries meeting in Doha. Currently, the market consensus assumes that the agreement to freeze the oil output will be reached.

The broad market was not influenced by the report on retail sales. It declined 0.3 percent on a monthly basis against the positive 0.1 percent forecast. The data, excluding car sales, increased 0.2 percent against the 0.4 percent expected. The prior month’s data was revised. The data on retail sales suggests that the first quarter was weak for consumption, which may negatively affect the GDP growth.

Zloty's weakness

Today's data on the current account balance missed the forecast. The National Bank of Poland showed a 383 million euro deficit against the 500 million euros surplus that was expected. The report showed a severe outflow of portfolio investments, that amounted to 2.6 billion euros. This factor may negatively affect the zloty.

On Wednesday, the zloty posted strong losses. The zloty dropped against all its major pairs. Recently, the zloty has declined more than the forint, which may suggest a longer period of weakness.

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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 Sp. z o.o is prohibited.

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