Afternoon analysis 20.04.2017

The dollar was not supported by the solid data from the American labor market. The data from the Polish economy was surprisingly positive, but its impact on the zloty was limited, due to a slightly worse sentiment towards the zloty.

American labor market

Last week’s jobless claims was at the level of 244k. This result is near this index’s forty-four-year minimum. Moreover, the amount of people who collect the unemployment benefits went down to the level of 1.979 million, which is the lowest since April 2000. This is another consecutive report that emphasizes a positive condition of the American labor market.

Nevertheless, this data had a limited impact on the dollar. The EUR/USD went down from 1.078 to 1.075. However, the GBP/USD has remained near 1.28 and the USD/JPY is still near 109. The dollar’s index went down to 99.3 points at approximately 11.30, which is its lowest level since March 28th.

Positive data from Poland

According to the Polish Central Statistical Office (GUS), the industrial production increased 11.1% YOY. The construction and assembly production increased 17.2% YOY, which was definitely more than estimated (7.3% YOY). Retail sales increased 9.7% YOY and the PPI growth was at the level of 4.7% YOY. All this data was better than expected.

Even though this data is positive for the zloty, its impact may be limited due to the negative sentiment towards the PLN. Nevertheless, the Polish currency has managed to work-off a portion of its losses. The EUR/PLN went below 4.26, despite the euro’s global strength.

Today’s data from the GUS may also suggest that the GDP for the first quarter would be better than expected. However, the zloty has been weakened by the dovish attitude from the Monetary Policy Council. Unless this attitude alters, the zloty can’t count for a significant strengthening. This can most likely be caused by a growth of baseline inflation.

Tomorrow’s events

IHS Markit will publish the data regarding both the industrial and services PMI for April. These indexes have been increasing rapidly in the eurozone. The market consensus indicates positive results for both German and French PMI data and this may eventually translate to high PMI data for the entire eurozone. However, we need to keep in mind that the eurozone’s PMI has been at its highest level in approximately six years. If this is sustained, the euro’s positive streak will continue.

At 10.30, the Office for National Statistics will present the data regarding British retail sales. This index’s reading from February reached 3.7% YOY, which was by 1.1 percentage points higher than expected. This was surprising, because retail sales had been worse than expected over the preceding three months. Tomorrow’s data may appear significantly crucial for the pound’s evaluation, which has been very volatile due to Brexit.

At 15.45, IHS Markit will publish the data regarding the American PMI for April. The market consensus indicates that this index’s quotation should improve. However, this would have a limited impact on the dollar. Nevertheless, the PMI readings may give hints regarding the ISM readings, which are more significant for the dollar.