Afternoon analysis 15.12.2016

15.12.2016 16:43|Bartosz Grejner

The German industrial PMI for December appeared to be at its highest level in approximately three years. No changes in the American inflation for November. The Polish currency caught some breath after increasing its fifteen-year minimum against the dollar.

Positive industrial data

Today, IHS Markit published the December PMI data for Germany, as well as for the euro zone. The German index increased to the level of 55.5. This was its highest level since January 2014. This was caused by an increase in assets of goods producers. PMI index for the euro zone was also better than expected and reached the level of 54.9. This was its highest level in more than five years. The main reason was the euro’s depreciation, which caused the production growth.

Markit also published the data regarding the services sector for Germany and the euro zone. Both of these readings were better than expected, as well as than the readings for November. The German PMI for services was at the level of 53.8, which was its lowest level since September. The euro zone’s PMI was at the level of 53.2 and was the lowest in two months. Despite weaker growth, services sector remained near the average results for 2016. However, expectations of services providers remained high. Therefore, the services sector is expected to grow in 2017.

Solid American data

Today’s quotations were determined by the Federal Reserve’s announcement from yesterday. Its hawkish tone caused a further strengthening of the dollar and an increase in treasury bonds. However, significant data from the American economy appeared one hour before today’s session. The Bureau of Labor Statistics published the CPI data for November. This index appeared to be consistent with the consensus (1.7% YoY). However, the base case index (excluding energy and food) was slightly worse than expected (2.1% YoY vs 2.2% YoY). Nevertheless, this value was consistent with the data from October, so the negative surprise was limited.

The American industrial data was a positive surprise. The NY Empire State index for December, reached its highest level since March. The Philadelphia Fed index only confirmed a positive condition of the American industry in December. This index was the highest in two years. Let’s keep in mind that the Federal Reserve’s industrial data for November were worse than expected. However, the industrial processing production was better than expected.

Today, the Bank of England left the British interest rates unchanged (0.25%). Additionally, this institution decided that the maximum level of purchase of corporate bonds will be 10 billion pounds and the maximum level of purchase of treasury bonds will be 435 billion pounds. Moreover, the BoE members were unanimous in their decision. Mark Carney, the BoE chairman, claimed that inflation path may be lower than it was estimated in November.

However, the pound’s reaction to this announcement was limited. The British currency gained against the majority of currencies, not counting the dollar. The GBP/USD was above 1.27 yesterday. Today, it was nearing 1.24. However, a work-off on the dollar cause this pair to return near 1.25. At 2.00 PM, the EUR/USD went down to 1.04 for the first time since January 2003. However, the dollar has been wearing-off since then. The EUR/USD is at the level of 1.044 and the USD/JPY went down from 118.66 to 118.2.

New minimum on the dollar

Sudden increase in the dollar’s value caused the USD/PLN to reach its new fifteen-year maximum (4.28). However, the reaction on the other PLN currency pairs was limited. Even though the EUR/PLN reached the level of 4.46 at noon, it went by 0.03 PLN lower at approximately 4.00 PM. Let’s keep in mind that the euro should remain relatively weak due to a mild monetary policy of the European Central Bank. Therefore, a further growth of the dollar should not cause the zloty to significantly wear-off against the euro.

Tomorrow’s events

At 11.00 AM, the Eurostat will publish the second reading of the euro zone’s CPI index for November. The euro zone’s inflation has been increasing since mid-2016. Inflation growth was at the level of 0.5% YoY in October and the initial reading for November was at the level of 0.6% YoY. The market consensus for November is consistent with the initial data. Increasing inflation is caused by increasing energy prices, which are a result of the global limit in oil production. The Eurostat will also present the data regarding the euro zone’s trade balance for October. This index was significantly above expectations in September (26.5 billion euro vs 22.5 billion euro), as well as at the highest level since June (29.2 billion). Currently, the market expects it to reach the level of 29 billion. If the above data is positive, this should support the euro. However, this impact most likely will be relatively limited. Currently, the market is dominated by the sentiment, which has been established by the decisions from the ECB, as well as from the Federal Reserve.

At 2.00 PM, the Polish Central Statistical Office (GUS) will publish the data regarding employment in November. Employment growth in the Polish economy has been increasing since the beginning of 2014 (3.1% in October). The market consensus estimates this index to be at the level of 3.0%. This would be its lowest growth since May. Employment in Poland remains at a low level in comparison to the other EU countries. The previous GUS data showed that employment for 16-64 bracket is at the level of 64.5%, while in the United Kingdom, it’s at the level of 74.4% (data provided by the Office for National Statistics). The zloty is currently under pressure of the Fed’s decision. Therefore, the market most likely will ignore this data, especially that it’s not expected to be significantly different than 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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