Afternoon analysis 18.01.2018

Mixed data from the US with a limited impact on the dollar - the EUR/USD pair rose again to 1.2250. Stable zloty quotations - tomorrow important data from the Polish economy will be published.

The lowest initial jobless claims in almost 45 years

According to the latest Department of Labor report, the number of initial jobless claims in the US fell to 220k, 41k below the result of last week, being at the same time by 30k below market expectations. Moreover, it is the lowest number since February 24th, 1973. The data on insured unemployed appeared to be slightly worse - it increased to 1.952 million (the highest since the end of November), 52k above expectations.

Similarly to today's report on jobless claims, the data from the real estate market in the USA appeared to be mixed. Building permits increased to 1.302 million in December, slightly above expectations (by 12k), but housing started to fail to meet market expectations and reached 1.192 million, 83k below consensus.

The aforementioned data has had limited impact on dollar (and other currencies) quotations and its mixed results may not even influence it. After testing the 1.22 level, the main pair quotations (EUR/USD) returned to 1.2250. The US currency was supported by the growing yields of the US government bonds, whose increases were in the past correlated with its appreciation.

Stable zloty

As a result, the zloty appreciated compared to the dollar. The USD/PLN quotations returned to the 3.40 PLN level, close to 3-year lows. In relation to other currencies, the Polish currency remained close to yesterday's levels (also compared to the regional forint). The calendar of scheduled events having the power of influencing the zloty's exchange rate is practically empty, therefore, the stabilisation of the zloty is the most probable scenario for today.

If a strong sentiment depreciation was observed on the US market and the main indexes clearly lost their value, zloty valuation may deteriorate. The dollar’s appreciation may hamper zloty strengthening, although it is rather unlikely to occur today. Investors may wait for the meeting of the European Central Bank. On Thursday (when ECB meeting is scheduled), the significant movements on the currency market may be observed.

Tomorrow's preview

At 2.00 p.m., the Polish Central Statistical Office (GUS) will publish data on industrial production, retail sales and producer inflation (PPI) in December. The market's attention will be mainly focused on two of these first publications. During the last five months, the dynamics of retail sales growth exceeded 7% per year in each of them and even reached a 10.2% growth rate in November (the highest pace since January).

Industrial production was above expectations, within the last five months its growth pace did not decrease below 4% year-on-year and in October and November it amounted to 12.3% and 9.1% respectively.

Currently, consumption, which retail sales are a good indicator of, is the main force driving the Polish economy. Its growth pace is likely to remain high in the coming months. The median of market expectations indicates an increase in retail sales in December of 8.6% per year. In the case of industrial production, it is expected to slow down to 3.5% per year and construction production to 11%.

Sustaining the high pace of retail sales and somewhat higher industrial production growth than consensus (higher than 4%), could make the scenario of further high economic growth in Q1, in Poland, even more probable. As a result, the zloty may appreciate, although its growth potential is limited.

External factors determine the Polish currency movements. The weak dollar allows the zloty to maintain a relatively good condition in relation to the main currencies. The USD appreciation may lead to zloty weakening, which may be particularly sensitive to the rebound given the recent appreciation of its value.