Afternoon analysis 18.08.2016:
The dollar remains relatively weak in the global market, despite a low amount of jobless claims in the USA. Fatal data regarding industrial production and worse than expected readings regarding retail sales. The zloty is losing value. However, the overvalue is not dramatic.
The global currency market did not show a large volatility this afternoon. The EUR/USD remains above 1.1300. The pound sustained its growths achieved after better than expected retail sales data from the United Kingdom. The dollar is near the 100 level against the yen.
We received new jobless claims data from the USA at 14.30 (2.30 PM). It was lower than expected (262k). These readings are historically low and do not indicate any deterioration in the American labor market. The data is supporting the scenario of relatively positive payrolls (150-200k). This is of course if they are not disturbed by statistical matters, as it has happened in May.
The afternoon volatility may be increased by testimonies of the Fed representatives. William Dudley will speak of the local economy after 16.00 (4.00 PM). The New York Fed chairman may refer to the monetary policy in the questions&answers session, especially that his previous comments for Fox Business caused a lot of market disturbances. However, the general sentiment from after yesterday's minutes will rather not change.
We have underestimated a possible impact of the Polish readings on the zloty in today's Daily analysis. This was a result of the fact that the global sentiment has been set for at least few forthcoming hours and only the data that is significantly different than the consensus could have a clear impact on the PLN.
After 14.00 (2.00 PM), it appeared that the GUS readings are fatal. The industrial production for July decreased by 3.4% y/y, against the consensus at a positive 0.9% y/y level. These are the worst readings since December 2012, as well as the worst publication since the of 2009 financial crisis.
Even if we equalize the reading by less working days in July 2015, the production will only be at a positive 1.6% y/y level. This is definitely less than the 3-5% range, in which the data was during the past years. However, in certain months of 2014 or in 2012, there were lower publications equalized by the amount of working days as well.
Retail sales data was also not impressive. After including inflation, it only decreased by 2.0% (against a positive 3.4% y/y consensus). Looking at particular components, we will not see any significant changes in particular categories in comparison to the trend from the year's beginning, except for cars sales. It was increasing approximately 10% y/y in the January-June range and last months it was at a positive 0.2% level.
The data regarding the zloty is negative. It may refresh the discussion regarding a decrease in interest rates, at least temporary. However, we do not expect an actual monetary easing in Poland. Taking into consideration a relatively positive external situation, industrial production should rebound as well. However, its breakdown in July is not a positive signal. It seems that a change of the euro exchange rate by approximately 0.015-0.02 PLN, reflects the risk scale. Thus, despite a relatively positive global sentiment, the EUR/PLN may move in the area of 4.30 until the end of the week.
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