Afternoon analysis 05.04.2017

The euro has been strengthened by the comments from the Bundesbank chairman. However, this rebound has been eclipsed by a positive ADP report regarding the employment rate in the American non-agricultural sector. Polish interest rates remain unchanged, but the zloty’s condition is still positive.

Weidmann and ADP report

Jens Weidmann, the Bundesbank chairman and an ECB member, told “Die Zeit” that the moment of withdrawal from the QE program is near. He also emphasized that he would prefer the QE to be finished within one year. This caused the EUR/USD to increase from 1.0670 to 1.0685. However, we need to keep in mind that Wiedmann is one of the hawkish ECB members. Therefore, his comments concerning the QE should not be surprising.

However, the ADP report regarding the employment rate in the American non-agricultural sector for March was surprising. This index was yet again definitively better than expected (263k vs 187k). However, the result for February was revised from 298k to 245k. The smallest companies quoted the largest increase in employment (118k). The largest companies quoted an increase by 45k.

This caused the dollar to strengthen and the EUR/USD to return to the level from before Weidmann’s comments (1.066-1.067). A stronger reaction may be observed after the opening of the New York stock exchange.

Zloty is stronger

The zloty’s condition improved today, even though there was no macroeconomic data that would be significant for the Polish currency. The National Bank of Poland informed that the Monetary Policy Council has left interest rates unchanged, which was consistent with the market consensus. Nevertheless, the zloty has managed to work-off yesterday’s losses against the euro, franc and dollar.

The GBP/PLN remains unchanged due to the pound’s global strengthening, which was caused by positive data from the services sector. The zloty’s strong position has been confirmed by the PLN/HUF, which has increased to the level of 73.2.

The MPC press conference will be held today at 16.00. Even though its potential impact seems to be limited, a dovish message may reverse the appreciation trend on the zloty.

Tomorrow’s events

At 8.00, Destatis will publish the data regarding the industrial orders in Germany for February. In January, this index was disappointing for investors (negative 7.4% MoM). However, this didn’t affect the industrial production directly (positive 2.4% MoM). Currently, the market consensus is at the level of 4% MoM. This index is relatively volatile, so its impact on the euro should be limited.

The ECB will publish the minutes from its previous meeting tomorrow as well (at 13.30). Over the past few weeks, the euro has been relatively volatile due to the over-interpretation of the previous ECB announcement. We expect these fluctuations to continue due to the minutes.

At 14.30, the American Labor Department will publish weekly jobless claims. Last week’s report showed that this index was at the level of 258k. Currently, the market consensus is at the level of 250k. The dollar has been in the upward trend, which should be supported by the positive data from the labor market. However, we shouldn’t expect large fluctuations on the American currency.