The dollar's situation improves before the inflation data from the USA. Positive signals for the pound as the UK's current account deficit is decreasing. The zloty remains relatively stable. The EUR/PLN pair close to the 4.21 level.
The most important macro data (CET - Central European Time). Surveys of macro data are based on information from Bloomberg unless noted otherwise.
2:00 p.m.: March inflation data from Germany (estimates: 0.5% MOM and 1.7% YOY),
2:30 p.m.: PCE inflation data from the US for February (estimates: 1.7% YOY and 0.2% MOM, in core terms 0.2% MOM and 1.6% YOY),
2:30 p.m.: Weekly data on initial jobless claims in the USA (estimates: 230k).
Dollar is getting stronger/h2>
Since yesterday afternoon, strong increases could be observed. The DXY index rose by 0.7%. The movement began after the final GDP reading publication in the US for Q4. The data was slightly above market expectations, but the real question is whether investors are still interested in what happened in 2017.
Yesterday's readings may have only been an excuse to stop the dollar's depreciation and the market is waiting for the afternoon PCE inflation data from the USA for February. The consensus indicates the level of 1.6% year-on-year (1.5% year-on-year in January), but economists surveyed by the Bloomberg agency are practically equally divided into those who expect 1.5% and those who assume 1.6%. Therefore, the increase to 1.7% year-on-year would be more surprising than maintaining the 1.5% year-on-year level. The first case would support the dollar.
In the coming months, the base effects will diminish due to the decrease in the prices of telecommunications services or used a year ago cars. This may naturally raise inflation also the core one. If inflation was to accelerate now, it would send a positive signal to the dollar.
Pound supported by good information
Yesterday's report made by "The Times" on the possibility of presenting a plan to solve the UK/Ireland border issue has not yet been made public. As a result, the pound depreciated even before the dollar strengthened. However, the pound may be supported by macroeconomic data.
The UK current account (C/A) data for 2017 published today suggests a slow external balance. In 2016, the D/A deficit amounted to 5.8% of GDP, i.e. 113 billion GBP. Last year, it fell to 82 billion, so to 4.1% of GDP. This is still a lot, but we can see a clear improvement in the foreign trade balance in services and a lack of growth in the deficit of trade in goods. The primary and secondary balance also improved. The trade balance (services and goods) amounted to minus 28 billion GDP, compared to over 40 billion GDP in 2016. This information is positive for the sterling.
Stable situation for the zloty
The continuation of the global dollar strengthening has started to bring slight pressure on the zloty. However, these are limited, and the EUR/PLN pair was quoted close to the 4.21 boundary. In the afternoon, PCE's inflation data from the US economy will be important for the zloty.
If it turns out that the base PCE index will rise to 1.7%, it would probably be a positive signal for the dollar. In such a case, EUR/PLN could continue to grow slightly, and the USD/PLN could test the 3.45 levels. Readings in line with the consensus or lower are more likely to keep the zloty's valuation close to current levels.
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 acknowledgement of the source is prohibited.
See also:
28 Mar 2018 15:32
The US GDP surprises (Afternoon analysis 28.03.2018)
The dollar's situation improves before the inflation data from the USA. Positive signals for the pound as the UK's current account deficit is decreasing. The zloty remains relatively stable. The EUR/PLN pair close to the 4.21 level.
The most important macro data (CET - Central European Time). Surveys of macro data are based on information from Bloomberg unless noted otherwise.
Dollar is getting stronger/h2>
Since yesterday afternoon, strong increases could be observed. The DXY index rose by 0.7%. The movement began after the final GDP reading publication in the US for Q4. The data was slightly above market expectations, but the real question is whether investors are still interested in what happened in 2017.
Yesterday's readings may have only been an excuse to stop the dollar's depreciation and the market is waiting for the afternoon PCE inflation data from the USA for February. The consensus indicates the level of 1.6% year-on-year (1.5% year-on-year in January), but economists surveyed by the Bloomberg agency are practically equally divided into those who expect 1.5% and those who assume 1.6%. Therefore, the increase to 1.7% year-on-year would be more surprising than maintaining the 1.5% year-on-year level. The first case would support the dollar.
In the coming months, the base effects will diminish due to the decrease in the prices of telecommunications services or used a year ago cars. This may naturally raise inflation also the core one. If inflation was to accelerate now, it would send a positive signal to the dollar.
Pound supported by good information
Yesterday's report made by "The Times" on the possibility of presenting a plan to solve the UK/Ireland border issue has not yet been made public. As a result, the pound depreciated even before the dollar strengthened. However, the pound may be supported by macroeconomic data.
The UK current account (C/A) data for 2017 published today suggests a slow external balance. In 2016, the D/A deficit amounted to 5.8% of GDP, i.e. 113 billion GBP. Last year, it fell to 82 billion, so to 4.1% of GDP. This is still a lot, but we can see a clear improvement in the foreign trade balance in services and a lack of growth in the deficit of trade in goods. The primary and secondary balance also improved. The trade balance (services and goods) amounted to minus 28 billion GDP, compared to over 40 billion GDP in 2016. This information is positive for the sterling.
Stable situation for the zloty
The continuation of the global dollar strengthening has started to bring slight pressure on the zloty. However, these are limited, and the EUR/PLN pair was quoted close to the 4.21 boundary. In the afternoon, PCE's inflation data from the US economy will be important for the zloty.
If it turns out that the base PCE index will rise to 1.7%, it would probably be a positive signal for the dollar. In such a case, EUR/PLN could continue to grow slightly, and the USD/PLN could test the 3.45 levels. Readings in line with the consensus or lower are more likely to keep the zloty's valuation close to current levels.
See also:
The US GDP surprises (Afternoon analysis 28.03.2018)
Exchange rates remain stable (Daily analysis 28.03.2018)
The dollar appreciates (Afternoon analysis 27.03.2018)
Waiting for signals (Daily analysis 27.03.2018)
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