Afternoon analysis 13.10.2016

Jobless claims remain at their record low level. Worse British export to the USA burdens the import prices index. The second part of the day has been slightly better for the Polish currency.

Positive data from USA

Last week’s jobless claims were at the level of 246k and appeared to be 7k better than expected. The Labor Department also revised down the previous jobless claims reading from 249k to 246k. The four-week median decreased to 249.5k and remained at its 43-year minimum.

Last week was also the eighty-fourth consecutive week reporting jobless claims below 300k. This is the longest streak since 1970. Even though the data was better than expected, we remain at a low level. The potential of a negative impact in the case of negative data is larger than it would be in the case of positive data.

Today, we received the data from the Labor Statistics Bureau regarding export prices and import prices from September. The index of export prices increased by 0.3% (against 0.1%) in comparison to its result from August. On the other hand, import prices were slightly different than the consensus (positive 0.1% against positive 0.2%).

This result was mainly caused by the United Kingdom. Its import decreased by 0.9% in month on month relation. Even though today’s data from the American economy was positive, it didn’t translate to an increase in fluctuations of the dollar. The EUR/USD remained near 1.10.

Zloty is working-off a portion of its losses

Even though the EUR/USD has been moving near the 1.10 level today, the zloty’s condition managed to improve. The Polish currency neared its levels from yesterday. The euro returned to the level of 4.30 and the dollar went down from 3.92 to 3.90. The pound was relatively calm as well. The GBP/PLN was near the level of 4.76.

The zloty may still be under the influence of tomorrow’s data regarding the American retail sale, as well as Janet Yellen’s testimony, during the 60th Federal Reserve Economic Conference in Boston. Investors will try to find clues regarding the Federal Reserve meeting in December. However, Yellen probably won’t reveal more details than she previously did.

The CME estimates that the likelihood of rate hikes in December are 63.6%. However, if the retail sales data is better than expected, this result may increase. Moreover, this scenario would cause a wear-off of the zloty.

Tomorrow’s events

Tonight, we will know the data from the Chinese National Statistical Bureau regarding the CPI and PPI inflation for September. Investors will focus on these readings due to the yuan, as well as weaker trade balance data from today (decrease in export). The market consensus estimates that both indexes will increase in year on year relation by 0.3%.

Tomorrow, we will receive new data from the American economy. One hour before the opening of the New York stock market, the Labor Statistics Bureau will reveal information regarding base case retails sales for September. The reading from August was disappointing (negative 0.1% against positive 0.2%). This was the second consecutive month in which this index decreased.

This data is one of the main indicators of consumers expenses, which translate to a large economic activity. Therefore, this gives a view on a possible pace of the GDP growth in particular quarter. The consensus assumes it to be at the level of 0.4%. If the reading is yet again below zero, we may expect a slight decrease in the likelihood of rate hikes in December. It would also wear-off the dollar.