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Afternoon analysis 03.07.2015

3 Aug 2015 17:20|Artur Wiszniewski

The dollar dropped after the ISM index report missed the forecast. The Greek stock market reopened after five weeks. The zloty did not exploit the solid PMI report.

The US industry expansion is still subdued. The report on the ISM index missed the forecast. The measure dropped to 52.7 from the 53.5 level in the previous month. A result exceeding the 50 level signals an expansion. The forecast was for a result of 53.6.

However, somewhat optimistic was the new orders index, that increased to the highest level in seven months. Moreover, the production index also gained. In contrast, the employment index declined. And the foreign orders gauge also posted a lower result. A sign, that a strong dollar and the weakness of the global economy is still hurting the US exporters.

Today's reports were too vague to precisely assess their meaning for the Federal Reserve. Last week's data on the GDP growth showed an accelerating expansion, but the growth missed the forecast. Moreover, the data on wages missed the forecast by showing the lowest pace of growth in history.

Other reports from today showed that household spending increased 0.2 percent. It rose 0.7 percent in the prior period. The data suggests that the rising consumption may lead to increased price pressure. Household's income rose 0.4 percent - in line with the forecast.

A broader look at the US economy suggests that it has an increasing pace and is remaining in quite good shape. Nevertheless, the next key reports that will help to assess the outlook for the interest rate hikes are the number from the labor market. On Wednesday the ADP report on the private sector employment change is scheduled, and the monthly report on the labor market situation is due on Friday. These figures will help to assess the likelihood of an interest rate increase in September.

Recently, the EUR/USD has been volatile. But it could have taken any clear direction. A signal that the latest US reports are too hard to digest by investors.

Greek stock market reopened

After five weeks of capital control the Greek stock market reopened today. The major index dropped 20 percent, and the banking sector index plunged 30 percent.

The market reaction reflects the deterioration in the Greek economy after the recent period. The PMI index for the Greek industry dropped to 30.2 from the 46.9 level in the prior month. It has been the lowest level in history.

However, the stock market reopening was a step in the direction of normality. Currently, the crucial task is to secure a disbursement from the bailout program before the European Central Bank bill is due in August. An important fact is that the Prime Minister Alexis Tsipras has managed to defer the threat of a snap election.

Zloty declined

Earlier today, the zloty increased but the move was transitory. In the second part of the session the Polish currency dropped against all its major pairs.

The oil price plunge to the lowest level since March increased pressure on the rouble. The USD/RUB rose to the highest level since the end of February. The situation in the commodity market gives no hope for any reverse. Other commodity currencies were also under pressure.

Given the vague outlook for the Federal Reserve's plan for interest rate hikes, the zloty is not in a comfortable situation. The emerging market currencies decline also hit the zloty. As a result, the zloty is in the position to extend the decline.

3 Aug 2015 17:20|Artur Wiszniewski

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:

3 Aug 2015 13:00

Daily analysis 03.08.2015

31 Jul 2015 17:37

Afternoon analysis 31.07.2015

31 Jul 2015 13:30

Daily analysis 31.07.2015

30 Jul 2015 17:10

Afternoon analysis 30.07.2015

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