Afternoon analysis 18.05.2017

18.05.2017 15:00|Bartosz Grejner

Global markets were under selling pressure today, however, the sentiment slightly improved after better than expected UK and US data. The zloty continued its recent slump.

Markets feeling the pain

Today was the second day we observed an increased level of risk aversion on the sell-off of riskier assets. On the other hand, gold prices increased intraday to the highest level seen in May – around 1264 USD/oz. The yen appreciated as well – the Japanese currency was the most expensive in relation to the dollar since 25th April. The USD/JPY pair fell in today’s trading as low as 110.2, although it gained afterwards to sub 111 levels.

Positive data, after the morning’s UK retail sales figures, came from the US Department of Labor. Initial jobless claims were at 232k in the finished week which was 4k below market expectations. This was the fourth week in a row of falling jobless claims numbers. Yet another positive reading came in the form of the insured unemployment which came at 1.898 million. This was the lowest count since 5 November 1988, when the number was exactly the same. Also, this was the fifth week in a row of insured unemployment figures below 2 million.

The US currency gained as a result of this publication, however, it had gradually gained since the Asian session. The EUR/USD pair was during the night at 1.116 – after the Department of Labor report, it went down to 1.11. Also, European indexes halted their slump and even gained from today’s lows. Future contracts for US indexes behaved in a similar fashion.

This could suggest that in the afternoon session today, a slightly better sentiment could be seen on the market. One has to remember, though, that the recent global turmoil was caused by political factors which is unlikely to disappear soon and can cause further unease on the market in the coming days and weeks.

Zloty visibly weaker

Today was not a good day for the Polish currency – it had been significantly losing value since the early hours of trading. Although the sentiment towards emerging market currencies was substantially worse today, the zloty lost value even in relation to the Hungarian forint. The Swiss franc cost 3.89 PLN today – it was the most expensive in 9 days and 8 gr higher than the recent lows. Yesterday’s Monetary Policy Committee press conference didn’t play into it either – it held its recent dovish stance towards the monetary policy.

The Polish Central Statistical Office (GUS) published today data regarding the employment and wages change in the corporate sector. The average monthly wage in April was 4489.07 PLN and was 4.1% higher than a year ago, while a 4.4% increase was expected. Expectations were, however, exceeded in the case of employment in the sector which grew by 4.6%, while a reading 0.1 percentage points lower was expected. Nevertheless, the aforementioned data had little impact on the zloty. A combination of higher risk aversion and pressure on emerging markets currencies dominated today’s trading.

Tomorrow’s preview

The Polish Central Statistics Office (GUS) data regarding industrial production, retail sales and producers’ inflation (PPI) in April will probably be the most important event on the last day of trading this week (in the context of the zloty). Investors are most likely to focus on the first two – their growth rates in March were close to 6- and 5-year highs respectively.

The April’s readings could provide some clues to the GDP growth rate in the second quarter. The rate in Q1 was 4% according to the latest preliminary data from GUS. Yesterday, however, Adam Glapiński, Monetary Policy Committee chief, said he expects a 4% GDP growth rate in the whole 2017.

The market consensus points towards a 2.4% growth in industrial output, 8.9% retail sales growth and a 4.5% PPI index growth, compared to April 2016. All of the aforementioned estimates are below the March readings. The data could prove vital for the zloty as we have been observing a significantly worse sentiment towards emerging market currencies. Readings exceeding market expectations could halt the depreciation of the zloty and suggest a fast pace of GDP growth in Q2 as well.

 


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This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without the written permission from Cinkciarz.pl Sp. z o.o is prohibited.

See also:

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