Afternoon analysis 22.02.2017

The British GDP growth for the fourth quarter appeared to be lower than expected. The euro zone’s consumer inflation is at the level of 1.8% YoY. The EUR/PLN remains near the level of 4.30.

British GDP

According to the Office for National Statistics (ONS), the British GDP for the fourth quarter was worse than expected in the Year over Year interpretation (2% YoY). However, the Quarter over Quarter interpretations showed a positive result (0.7% QoQ), which was better than expected. Even though the YoY increase was disappointing, it still was at a relatively high level, in comparison to the EU countries.

The pound was weak today. The GBP/USD was pushed from the level of 1.25 to approximately 1.2430. The British currency remained stable against the euro. However, we need to keep in mind that the European currency is weaker, due to the political uncertainty (the elections in France, among others).

No surprises from euro zone

Today, Eurostat published the second CPI reading from the euro zone for January, which appeared to be consistent with the initial data, as well as with the market consensus. This index quoted a 1.8% YoY growth and its baseline reading was at the level of positive 0.9% YoY. The price level for the entire EU increased 1.7%.

Inflation increased the most in Belgium (3.1%) and in Latvia (2.9%). Deflation has not been quoted in any of the EU countries. Inflation growth was the lowest in Ireland and in Romania (0.2% and 0.3%, respectively). Inflation growth in the Year over Year interpretation was mainly caused by an increase in prices of fuel (14%), heating oil (26.4%) and vegetables (9.8%).

This data had a limited impact on the euro, due to the mild policy from the ECB. Low baseline inflation remains at a relatively low level and has not been showing the upward tendencies. However, inflation is at its highest level in more than four years.

The euro remains under pressure. The EUR/USD was testing the 1.05 level today. However, this pair bounced slightly above this level after the New York stock market has opened.

Zloty is relatively calm

The zloty has remained stable. The EUR/PLN is near the 4.30 level. The zloty strengthened slightly against the pound and the GBP/PLN was pushed from 5.11 to approximately 5.09.

The zloty may be affected by the FOMC minutes, which will be published today. However, taking into consideration the dollar’s appreciation (the market most likely partially included the potentially hawkish message in the USD evaluation), the eventual impact on the zloty may be limited.

Tomorrow’s events

At 8.00, Destatis will publish the final data regarding the German GDP growth for the fourth quarter. The initial reading was at the level of 1.2% YoY and 0.4% QoQ. The market consensus is at a similar level, hence this data should have a limited impact on the market. Also at 8.00, GfK will present the German consumer sentiment index. The market consensus is at the level of 10.1 points, which is only by 0.1 points lower than this index’s fifteen-year record. Taking into consideration positive macroeconomic data from the German economy, the consumer sentiment index will most likely emphasize its positive condition.

At 10.00, the Polish Central Statistical Office will publish the unemployment rate for January. The estimates are at the level of 8.7% (an increase by 0.4 percentage points). This would be this index’s highest level since June 2016. However, this increase may be a result of the fact that more people register as unemployed at the beginning of the year. This index increased by 0.5% MoM in January 2016, as well as in January 2015. Therefore, this reading shouldn’t impact the zloty significantly.

At 14.30, the American Labor Department will present the jobless claims index. Last week, its result was at the level of 239k, which was near its historical minimum. The market estimates a slight increase (1k). This reading’s impact on the dollar may be determined by the market’s reaction to the minutes from today. Moreover, the jobless claims index remains near its historical minimum.