Afternoon analysis 22.12.2016

Relatively positive data from the American economy. The American GDP growth, as well as the baseline orders for durable goods were better than expected. However, the PCE inflation was disappointing.

Positive economic growth

Today, the American Bureau of Economic Analyses published the third reading of the GDP growth for the third quarter. The first and the second readings were at the level of 2.9% QoQ and 3.2% QoQ, respectively. Currently, this index reached the level of 3.5%, which was higher than the market expectations (3.3%). This result was mostly caused by an increase in consumer expenses, government expenses, investments and export.

The data from the Census Bureau appeared better than expected as well. Even though the orders for durable goods were lower by 4.6% than in October, this result was better than expected (negative 4.7%). Moreover, the baseline index (excluding transport) increased by 0.5% MoM (vs expected positive 0.2% MoM). Orders for transport goods decreased 13.6% MoM.

Last week’s jobless claims data was disappointing (published by the Labor Department). This index was at the level of 275k, which was its highest level in six months. Despite that, this is the ninety-fourth consecutive result, which is below 300k.

The PCE inflation data was the most disappointing today. This index increased 1.6% YoY in November, which was worse than expected (1.7%). However, the PCE data didn’t change in the Month over Month interpretation. Let’s keep in mind that the Federal Reserve uses the PCE data for their forecasts.

The personal income index was weak as well and didn’t increase in the Month over Month interpretation for the first time in a year-and-a-half. The 0.2% MoM increase in personal expenses was also disappointing (estimation: 0.3%). As a result, the dollar wore-off and the EUR/USD went to the level of approximately 1.05.

Zloty is calm

Today, the zloty was relatively calm. We could even see its slight strengthening against the forint during the second part of the day. The EUR/PLN reached the level of 4.41, but came closer to the level of 4.40 this afternoon. After the American data, the USD/PLN went down to the level of 4.20 for the first time in one week. The pound remains weak and the GBP/PLN decreased below 5.20 for the first time in two weeks. At the same time, the GBP/USD was pushed near 1.23.

Tomorrow’s events

At 10.00 AM, the Polish Central Statistical Office will publish the data regarding unemployment rate for November. Since March 2013, this index has been gradually decreasing. In October, the unemployment rate in Poland was at the level of 8.2%. Despite that this is a very positive result, Poland still has a problem with a low employment rate. This index is approximately 10% lower than it is in developed markets. Nevertheless, the market expects the unemployment rate index to reach the level of 8.3% for November. Therefore, this data will most likely have a limited impact on the zloty.

At 10.30 AM, the Office for National Statistics will publish the data regarding GDP growth for the third quarter. Even though the market consensus expects it to remain at the level of 2.3% YoY and 0.5% QoQ, a significant deflection would increase volatility in the pound’s quotations. Due to Brexit, the British currency is sensitive to the macroeconomic data.

Moreover, we will know the data regarding the British current account for the third quarter tomorrow. This index was at the level of negative 25.9 billion pounds in the second quarter (revised to negative 26.7 billion) and at the level of negative 26.4 billion in the first quarter. Currently, the market expectations are at the level of negative 27.5 billion pounds.

At 4.00 PM, the University of Michigan will present the American consumer sentiment index for December. The initial reading of this index (two weeks ago) indicated the level of 98.0 points. This was only 0.2 points below its approximately fifteen-year record. The consumer sentiment index was 4.5% higher than in November 2015 and by 5.8% higher than in December 2015. This significant growth may be a result of Donald Trump’s unexpected victory in the American presidential elections, as well as of announcements of increases in infrastructural expenses, decreases in taxes and changes in regulations.

The market expects that this reading will be at the level of 98.0. However, we need to keep in mind that there is a risk of deteriorating the sentiment. A worse reading of this index could wear-off the dollar.