Afternoon analysis 15.05.2015

The American currency has clearly lost in value this week. The zloty on the other hand was relatively strong thanks to good macroeconomic data. This allowed the EUR/PLN pair to return in the area of 4.05.

The dollar is under pressure

This was not a good week for the American currency. Very weak data about the retail sales on the other side of the ocean, published on Wednesday, were especially at the centre of attention. The reading with the exclusion of more variable factors like fuel or cars has increased only by 0.2% m/m. It was by 0.4 percent less than expected.

It is worth noticing that it was not a one time disturbance. The annual data indicate an increase of retail sales by only 0.9% y/y. This is equal in comparison to the decrease of the reading in March (1.7%), and it is also the worst publication from this sector of economy since 2009.

After those data the dollar lost over one percent of its value in relation to the main currencies. Additionally, it is worth noticing that the data about supplies and the weak reading from the foreign trade, can cause the GDP reading for the first quarter to be reviewed downwards to minus 1% (estimations of JP Morgan).

Still, the weaker GDP can be blamed on the severe winter. However, the rebound after the first disappointing months of the year was not satisfying. It is not only reflected in retail sale data, but also in the data about industrial production, which basically stopped increasing a few months ago. The data about the consumers' sentiments in the United States, published on Friday, were also a surprise. They have decreased the most for over two years.

Thus, the above factors should move away the perspective of increasing interest rates in the USA. The representatives of the Federal Reserve and the economists, can consider anew the postponement of the monetary policy tightening. At the beginning of the year, the majority of the market expected the increase of money's value to occur in June. Now, the consensus is leaning towards September. However, if the American economy still disappoints, the discussion will be postponed to December.

This of course is negative information for the dollar, which is at its weakest in relation to the euro for three months. A short term trend of the falling buck, can extend to the forthcoming months, if we do not see a clear rebound on the other side of the ocean. This on the other hand, can mean that we may observe the return of the stronger USD only after a real increase of interest rates in the USA.

The zloty on a rising wave

The disturbance on the debt instruments market has caused a clear wear off of the zloty at the beginning of May. However, the calming down of the bonds' records has given a bit of space for the zloty. It took the advantage of the good data, and the EUR/PLN pair has dropped to the area of 4.05.

Basically all the information from this week was supporting the national currency. Beginning with more shallow deflation, through a very good reading of the GDP (3.5% y/y vs consensus of 3.3%), and finishing with a high surplus of current account. Today's comments from the GUS vice-chairwoman are also worth noticing. Halina Dmochowska said, that the economic increase was balanced and it resulted from the improvement of consumption, investments and net export.

Accelerating GDP, improvement of the national economy's competitiveness, more shallow deflation and the comments of the MPC's Jerzy Hausner about the necessity of increasing the interest rates in the second half of 2016. Those factors are a perfect fundamental mixture for enforcing the national currency. Thus, we need to expect the return to an appreciation trend on the zloty, which can only be disturbed by the commotion on the debt instruments market.