Afternoon analysis 22.11.2017

22.11.2017 15:49|Bartosz Grejner

Orders for durable goods in the US in October were worse than expected, although September's increases were revised upward. The dollar's quotations were relatively stable, just like the pounds. A good sentiment in the market favoured the Polish currency - the EUR/PLN pair still below 4.22.

Mixed data from the USA

Orders for durable goods in the US decreased by 1.2% in October in comparison with the previous month, although the market consensus indicated an increase of 0.3%.This was the first decrease in three months. Slightly lower than expected - by 0.1 percentage points and increasing by 0.4% were orders excluding transport. On the other hand, the good data for September was revised upward: from 2% to 2.2% for the headline index and from 0.7% to 1.1% for the core index (excluding transportation orders).

The number of initial jobless claims submitted last week was 239k. It turned out to be slightly better than expected (by 1k), although the data on the number of insured unemployment failed to meet market expectations. This number increased from 1.868 million to 1.904 million last week (consensus was 24k less).

Mixed macroeconomic data from the US has practically not led to changes in the dollar's valuation. Around midday, the EUR/USD quotations were around 1.175 and this level was also observed at 3.00 p.m. Increased fluctuations in the dollar could be caused by the publication of minutes from the last meeting of the Federal Reserve Monetary Committee (FOMC).

However, the influence of the minutes on the dollar is likely to be limited - the rates hike in December is practically decided and President Janet Yellen has already resigned from the position of the President of the Federal Reserve. As a result, the chance of the EUR/USD quotation breaching the range 1.17-1.18 before Thanksgiving Day in the US is limited.

Changes to the pound were limited

The pound weakened a little just after Philip Hammond, British Chancellor of the Exchequer, spoke before Parliament. As expected, he has lowered his economic growth projections for this year from 2% YOY to 1.5%. The GDP growth pace expectations for next year were also revised from 1.6% to 1.4% and in 2019 from 1.7% to 1.3%.

However, the movements were not significant - during the morning part of quotations one unit of the British currency cost 1.326 USD and a moment before 2.00 p.m. it cost 1.322. However, this is close to yesterday's level and in the quotation range that was observed in recent days. Slightly worse than expected data on orders for durable goods in the US in October also contributed to the GBP/USD exchange rate return to approx. 1.326 - 1.327, which is the upper boundary of the pair's quotations for the last three weeks.

Slightly stronger zloty

The continuation of a good sentiment in the market allowed the zloty to strengthen at the beginning of the European session. The EUR/PLN quotations fell at 9.00 a.m. to 4.211, the lowest level since mid-July this year. In the morning, also the relationship between the franc and the zloty was close to its lowest level since mid-January 2015 - one unit of the Swiss currency cost 3.617 PLN.

In the following hours, a gradual franc appreciation was observed on the global market, which also led to an increase in the CHF/PLN exchange rate of 3.63 at around 3.00 p.m. The EUR/PLN pair remained close to morning lows and the USD/PLN was around 3.59.

Currently, the zloty's quotations depend on external factors, therefore maintaining a positive sentiment in the market should help in its valuation. On the other hand, the adjustment of historical highs on the US stock market combined with the dollar's appreciation could slightly weaken the Polish currency.

Tomorrow's preview

In the US, Thanksgiving is celebrated on Thursday and the US exchange markets will be closed. In the absence of some US investors, liquidity is likely to be reduced. This may suggest that the main currency pairs' volatility may be limited. On the other hand, in the case of important and unexpected news, changes may sometimes be more pronounced due to lower liquidity level.

At 8.00, the Federal Statistical Office (Destatis) will present data on the economic growth pace of Europe's largest economy in Q3. The preliminary data from 8 days ago surprised positively by the fact that GDP grew at a pace of 2.8% compared to the same period last year (and 0.8% to the previous quarter). Although this will be a second reading and the likelihood of a significant deviation from the initial data is limited, a reading that again exceeds expectations could strengthen the euro somewhat.

Tomorrow the preliminary data of November's PMI indexes (industrial and service sectors) will be published for France (9 a.m.), Germany (9.30 a.m.) and the eurozone (10 a.m.). In recent months, these indexes indicated an improving condition of the eurozone's economy and its largest economies (especially in the case of industry). The median of market expectations point to readings close to November - data similar to that from last month or slightly higher could confirm this trend and slightly strengthen the euro.

At 10.30 a.m., the Office for National Statistics (ONS) will present data on the UK GDP growth pace in Q3. As in the case of Germany, this will be a second reading - preliminary data showed that the economy grew at a pace of 1.5% YOY in July-September, slightly above the market expectations (1.4%) and similarly as in the previous quarter. Therefore, the chances of a significant deviation from the initial data are limited. However, GDP growth of less than 1.5% (on an annual basis) would have been the slowest in over four years and could slightly weaken the pound.

 


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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.

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