Afternoon analysis 17.12.2015

, author:

Marcin Lipka

The markets were calm after the Federal Reserve decision to raise the interest rates. The dollar gained on labor market data. The zloty moved higher after solid reports from the Polish economy.

The first decision to raise the interest rates by the Federal Reserve in almost a decade did not worry the markets. It was due to very good communication of the Fed members and the markets. In contrast, the European Central Bank meeting at the beginning of December severely disappointed investors as the central bank did not increase the monthly level of asset purchases in spite of earlier suggestions form the policymakers.

The Fed's statement suggest that the central bank will decide whether to raise the rates based on the developments in the economy. In addition, the inflation rate will be closely watched. The monetary authorities will scrutinize the current and expected inflation levels. Given the situation, the market attention will shift to inflation reports and the data that has influence of it.

Today, the dollar gained after the unemployment claims release. The number of unemployment claims dropped to 271k from 282k. It was in line with the forecast. The market reaction showed that investors are more susceptible to the economic reports.

However, the general market sentiment is very positive. The European and the US markets moved higher. However, a stronger dollar negatively affected the commodities prices and the emerging market currencies.

Weaker Ifo

Although the sentiment in the German economy is positive, it was weaker than in the prior month. The Ifo index dropped to 108.7 from 109 in November. It was below the forecast that expected increase. However, expectations in manufacturing were improved. As a result, the anxiety due to emerging market slowdown did not result in deterioration of situation in Germany.

Positive tendencies were shown by yesterday's data. The PMI reports in the eurozone countries showed improvement in the labor market. The employment index increased in the highest pace in four years. As a result, the probability of improvement in the employment situation increased.

The zloty gained on data

The Polish reports from November were very good. After solid labor market data today readings on industrial production and retail sales were very good.

Production increased 7.8 percent. It was above the forecast. The growth in construction stood at 1.2 percent against minus 5.2 percent in the prior month. Retail sales increased 3.3 percent after 0.8 percent growth in the prior month. It was also above the expectations.

The zloty was steady after the decision of the Federal Reserve to raise rates. Other emerging market currencies were also stable. In the second part of the session, the zloty gained against the euro, the frank and the pound on better than expected data. The dollar was near 3.95 zloty.

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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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