Afternoon analysis 12.04.2017

A calm day in the currency market. The American data regarding the import prices had a minor impact on the dollar. Poland’s baseline inflation appeared to be the highest in two-and-a-half years.

EUR/USD is near 1.06

Today’s calm trade was partially caused by the lack of significant macroeconomic data. Even though the data from the British labor market was published, their impact appeared to be limited. The average salary for the period between December and February increased 2.3% YOY. However, this index’s real growath was at the level of 0.2% YOY). The GBP/USD remains near 1.25.

The yen has maintained its yesterday’s gains and emphasized the risk aversion in the market. The USD/JPY remains below 110. At approximately 11.00, we had been observing the dollar’s slight strengthening. The EUR/USD went down from 1.062 to 1.059. This caused the dollar’s index to increase from 100.5 to 100.7.

At 14.30, the Bureau of Labor Statistics informed that the import prices decreased by 0.2% MoM. This was mainly caused by a decrease in food and beverages prices (negative 0.7% MoM), as well as in the raw material prices.

However, the import prices increased 4.2% YOY. The largest growth was quoted by the raw material prices. This data had a limited impact on the dollar and the EUR/USD remained in the area of 1.06.

Zloty is stable. Inflation is growing

Today, the USD/PLN remained slightly above the 4.00 and the GBP/PLN was slightly above 5.00. However, an impulse for the zloty’s appreciation appeared at 14.00. At that time, it appeared that baseline inflation for March appeared to be higher than expected. However, the zloty remained stable.

The above mentioned index increased 0.6% YOY (estimates: 0.5% YOY). This information is positive for the zloty, but the Polish currency has recently been affected by the sentiment towards the emerging market currencies, which has recently become slightly worse. The zloty also has been weaker because of the dovish attitude from the MPC. However, higher than expected baseline inflation may cause that the Council will slightly change its message.

Tomorrow’s events

At 14.00, the National Bank of Poland will publish the current account for February. This index’s reading for January not only was significantly worse than the market consensus (2.457 billion euros vs 360 million euros), but also appeared to be the worst in history.

Currently, the market consensus is at the level of approximately 57 million euros. If the current account index is higher than expected, this may strengthen the zloty. Nevertheless, the dovish attitude of the Monetary Policy Council continues to weaken the zloty.

At 14.30, the American Labor Department will publish the weekly jobless claims. Last week’s result (234k) was better than both the consensus and the previous reading. Currently, the market consensus is at the level of 245k. However, taking into consideration that this index has been near its historical minimum for weeks, it most likely will not affect the dollar significantly.

Also at 14.30, the Bureau of Labor Statistics (BLS) will present the data regarding the American PPI for March. This index has been increasing rapidly in the YOY interpretation since September. In February, it reached the level of 2.2% YOY, which was its highest result since June 2016. Currently, the market consensus is at the level of 2.4% YOY.

However, baseline PPI (excluding energy and food) has been increasing much slower over the past few months (1.5% YOY in February). This index’s growth is estimated to be at the level of positive 1.8% for March. The PPI may indicate a trend of the CPI. Therefore, if the PPI is higher than expected, this may theoretically strengthen the dollar. Nevertheless, the CPI data, as well as the retail sales data (both will be published on Friday) should have a significantly stronger impact on the American currency. This is especially taking into consideration the holiday period and a lower liquidity.