Afternoon analysis 15.02.2017

The American economic data for January was positive. The zloty’s reaction to the American data was limited.

Positive impulse for dollar

After yesterday’s hawkish testimony from Janet Yellen, the American Bureau of Labor Statistics informed that the CPI was at the level of 2.5% YoY in January. This was its best result in the YoY interpretation in four-and-a-half years. The baseline inflation was at the level of 2.3% YoY, which was better than expected.

The household food prices decreased 1.9% YoY. The largest growth was quoted in the case of the energy prices (10.8% YoY). Fuel increased 20.3% and gas increased 10.1%. This is a result of increasing raw material prices. The baseline inflation increased due to the product prices (positive 4.7% YoY), medical services (positive 3.6% YoY) and household fees (positive 3.5% YoY).

Census Bureau presented the retail sales data for January (positive 0.4% MoM), which was better than expected. Moreover, the retail sales data for December was revised from 0.6% to 1%. The baseline retail sales index increased 0.8% MoM. The largest growth was quoted in sales at gas stations (positive 2.3% MoM and positive 14.2% YoY). The largest decline in MoM interpretation was quoted on the car sales. However, this index increased 6.8% YoY.

The dollar’s reaction was positive. The EUR/USD was pushed to 1.052, which was its lowest level in one month. Moreover, the dollar’s index (DXY) increased to the level of 101.7 points. Even though the Federal Reserve does not take the CPI into consideration when it comes to projections of the future inflation, this index gives the market hints regarding inflation tendencies in the American market. Positive CPI has increased the likelihood of rate hikes in March. Therefore, we may expect the dollar’s strengthening in the forthcoming days.

Stable zloty

The zloty remains relatively calm. The EUR/PLN is near the level of 4.30 and the CHF/PLN is near the level of 4.04. The pound continued its depreciation, due to negative data regarding salaries in the British economy. The GBP/PLN went down from 5.08 to 5.05.

The largest changes were quoted on the USD/PLN. Due to positive data from the American economy, this pair reached the level of 4.09, which is its highest in more than three weeks. However, apart from this, the zloty behaved relatively calm.

Tomorrow’s events

At 2.00 PM, the Polish Central Statistical Office (GUS) will publish the data regarding salaries in the company sector for January. After reaching the level of positive 5.3% YoY in June 2016, this index has been decreasing over the following months. In December, it reached the level of positive 2.7%, which appeared to be worse than the consensus, as well as its worst result in one-and-a-half year. Currently, the market expects an increase at the level of 4% YoY. Increasing wages could confirm increasing inflation, which would support the zloty.

Also at 2.00 PM, GUS will publish the employment data. This index has been increasing since the beginning of 2014. However, it has been withing a relatively narrow range (2.8% - 3.2% YoY) over the past six months. The market consensus is at the level of 2.8%. This data most likely will not impact the zloty significantly.

However, the market will most likely focus on Friday’s data regarding the industrial production and the retail sales for January. The market expects a positive trend from the fourth quarter of 2016 to continue. Currently, the EUR/PLN is near the level of 4.30 and Friday’s data may introduce larger fluctuations on this pair.

At 2.30 PM, the American Labor Department will publish the jobless claims data. Last week, this index was at the level of 234k, which is near its forty-year minimum. This also caused the four-week moving average to be pushed to the level of 244.25k, which is its lowest value since November 3rd, 1973. The market consensus is currently at the level of 245k.

Even though this data is significant for the American labor market, it will most likely have a minor impact on the dollar. This is because its estimated levels are near its historical minimum. Moreover, the market sentiment is still focused on yesterday’s hawkish testimony from Janet Yellen, in which she suggested that it would be a mistake to postpone rate hikes for too long. As a result, the dollar gained value.