Afternoon analysis 15.03.2017

15.03.2017 15:34|Bartosz Grejner

The pound became weaker due to worse data regarding salaries, as well as to a warning from Fitch agency. Both the American consumer inflation and the retail sales data are consistent with the consensus. The zloty is stable before the FOMC meeting.

Mixed data from UK

The Office for National Statistics published the data from the Bitish labor market. The unemployment rate increased from 4.8% to 4.7%. The data regarding the jobless claims was also better than expected and reached the level of 11.3k.

However, the data regarding the average salary was at the level of 2.2% YoY, which was the worst in more than six months. This caused the GBP/USD to be pushed below the 1.21 level. The pound has also been weakened by the announcement from Fitch agency, which stated that if the Scottish independence referendum results in Scotland leaving the United Kingdom, this may cause a downgrade in Britain’s rating.

According to Fitch, Scotland’s independence would bring negative results for the economy, caused by an uncertainty regarding the trade between these countries. Moreover, this would increase the spread between the public dept and the GDP (up to 8%). However, the Scottish referendum is still a far cry. Nicole Sturgeon would like to conduct it sometime between Autumn 2018 and Spring 2019. This is when the Brexit conditions will have been established.

No surprises

The Bureau of Labor Statistics informed that the CPI for February was at the level of 2.7% YoY, which was consisted with the consensus. This is the seventh consecutive month of inflation growth. Baseline inflation was also consistent with the market consensus (2.2%). However, its components show a large impact of the raw material prices. The fuel prices alone increased 30.7% YoY.

Census Bureau published the retail sales data from February, which was at the level of 0.1% MoM. Today’s data from the USA was neutral for the dollar. The EUR/USD remains within the range of 1.062-1.063. However, the Federal Reserve meeting should cause an increase in the volatility level. Shortly before the opening of the New York stock market, the EUR/USD was pushed near the level of 1.06.

Zloty is stable

The Polish Central Statistical Office (GUS) informed that baseline inflation was at the level of 0.3% YoY, which was consistent with the consensus. This data had a limited impact on the zloty, which has been relatively stable before the FOMC meeting.

However, the zloty’s volatility level may increase shortly before the FOMC meeting, especially in the case of the USD/PLN. If the FOMC announcement is hawkish, the dollar may increase significantly. However, the chances for the USD/PLN going above the 4.10 level seem minor.

Tomorrow’s events

At 11.00, Eurostat will publish the euro zone’s CPI fro February. According to the initial reading, this index was at the level of 2% YoY. This was its highest result in more than four years and confirmed that there has been an upward trend regarding inflation for the past six months. However, baseline inflation has been stable for approximately two years and its initial reading for February was at the level of 0.9% YoY. Due to the recent hawkish signals from the European Central Bank, the Eurostat’s reading may impact the euro. The market consensus is consistent with the initial reading. However, if the eventual result is higher, the euro may gain value.

Tomorrow’s information regarding the Bank of England’s decision regarding interest rates, as well s the QE program will most likely be even more important. The market consensus estimates that the main interest rate will remain unchanged (0.25%) and so will the QE program (435 billion pounds). In addition to this decision, the Bank of England will publish the minutes from its meeting. Investors will most likely focus on the suggestions regarding the future interest rates, as well as acceptable inflation level. The pound would gain value, if the BoE authorities suggest a sooner increase in interest rates (justified by increasing inflation).

At 13.30, the Labor Department will publish the weekly jobless claims. Last week, this index was at the level of 243k. The market consensus is at the level of 240k. The weekly jobless claims have recently been near their forty-four year minimum. Therefore, the data would have to be significantly inconsistent with the consensus (+/- 15k-20k), in order to cause a visible changes on the dollar.

At 14.00, the Polish Central Statistical Office (GUS) will present the data regarding salaries in the company sector, as well as the employment, for February. The latter index increased from 3.1% to 4.5% in January. Currently, the market consensus us at a similar level. Moreover, salaries in the company sector increased from 2.7% to 4.3% YoY in January. Even though the market consensus currently indicates a 0.3% decrease, this reading would still remain at a high level.

Also at 14.00, the National Bank of Poland will present Poland’s current account for January. Over the past few months, this index’s results have been better than expected, mainly due to a larger inflow of the EU funds. The market estimates that in January, it will achieve a positive value (355 million euro) for the first time since May 2016. Therefore, this reading may increase fluctuations on the zloty. Moreover, it may strengthen the Polish currency if it’s consistent with the consensus.



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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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