Afternoon analysis 15.11.2016

The American retail sales is increasing faster than expected. The Polish currency is under a negative influence of the worse GDP for the third quarter.

Less excuses for the Federal Reserve

Today, the Census Bureau published the retail sales data. The indexes increased by 0.8% MoM, which appeared better than expected (0.6% MoM). Moreover, its growth from September has been revised from 0.6% MoM to 1.0% MoM. In Year over Year interpretation, retail sales increased by 4.3%. This is its best result since November 2014. The total growth for the third quarter was at the level of 3.3% YoY.

Better than expected retail sales data was mostly a result of sales on gas stations (positive 2.2%, due to increasing fuel prices). Non-store retailers also increased their sales (1.5% MoM). However, its growth from October was much more impressive (12.9%). The largest depreciation was quoted by the furniture sector (negative 0.9% MoM and positive 1.7% in YoY). A 0.7% MoM depreciation was quoted in sales within trade centers, as well as restaurants.

Today, the New York Federal Reserve published the NY Empire State industrial processing index (positive 1.5 in November). Its result appeared to be better than the expected negative 2.5, as well as significantly better than the last month’s result (negative 6.8). Moreover, this is its first positive result since June.

Today’s positive data strengthened the dollar, which returned to the area of 1.07 on the EUR/USD. This also caused the rate hikes in December even more likely (90% according to the Fed rate contracts). The markets will probably search for information regarding the interest rate path in 2017. Moreover, investors will want to know the impact of Donald Trump’s fiscal policy on this path.

Zloty gives away its gains

Earlier today, the zloty was gaining against the dollar, franc, pound and euro. However, negative GDP publication for the third quarter caused the zloty to give away the majority of its gains. The USD/PLN is at the level of approximately 4.13. Moreover, the EUR/PLN is at the level of 4.43 PLN.

The zloty’s weakness was also confirmed by its relation to the Hungarian forint. Despite that the Hungarian GDP was also worse than expected (2.0% vs 2.5%), the forint was strengthening against the Polish currency. The PLN/HUF is near its three-year minimum (approximately 70). The zloty’s quotations will be determined by the global sentiment in the near future. However, today’s GDP reading has most likely decreased the market expectations regarding the final GDP for the entire 2016. This may decrease the zloty’s evaluation in the mid-term.

Tomorrow’s events

At 10.00 AM, the British Office of National Statistics (ONS) will publish the data regarding the unemployment rate in the United Kingdom for September. There has been a clear depreciation trend in this index since the beginning of 2012 (8.4% at that year). In May, this index went down to 4.9% and remained there until August. This is its lowest level in approximately eleven years. The market expects that the unemployment rate for September will remain unchanged.

The ONS will also publish the jobless claims for October. This index may be a suggestion regarding the unemployment rate for October. The market consensus assumes that this index will increase by 2k, in comparison to 0.7k in September. Theoretically, higher reading may appear negative for the British currency. However, we need to keep in mind that the unemployment level in the UK is historically low. Therefore, we can expect a clear reaction on the pound not until clear differences between estimates and actual data. The reaction should be relatively limited in any other case.

Fifteen minutes before the opening of the New York stock market, the Federal Reserve will publish the data regarding industrial production for October. This data has always been relatively volatile. However, taking into the consideration the market sentiment after the American elections, as well as a relatively large quotation volatility, the reading may impact the dollar. This, on the other hand, may impact the sentiment on the emerging markets. The market consensus estimates that the result will be at the level of 0.2% MoM.

At 4.30 PM, the Energy Information Agency (EIA) will publish the data regarding the oil supply and oil production in the USA for last week. The market estimates the oil supply to reach the level of approximately 1.27 million barrels per day. This would be approximately 50% less than the week before (2.34 million barrels per day). Increase in oil supply is negative for the oil prices, because it causes a supply pressure. However, the EIA report will also contain production data. Last week’s publication indicated its growth by approximately 2%. the Baker Hughes reading regarding active drill from Friday, may suggest an increase in production as well. This is because the amount of active drills was the highest since January. Increase in production may be negative for oil quotations.