Afternoon analysis 23.03.2017

The weekly jobless claims index is disappointing, but the insured unemployment rate was pushed to 2 million, which is its lowest level since November. The zloty has gained value but the MPC appeared to be predictable.

Jobless claims and labor market

According to the American Labor Department, the weekly jobless claims increased to 258k. This result is 18k higher than expected. At the same time, this is this index’s highest result since the end of January. However, this result has been compensated by the amount of insured unemployed, which went down to 2 million. This is its lowest level since November 2016.

This data has a limited impact on the dollar. The jobless claims remain near its historical minimum. The dollar’s index remains near the level of 99.5 points and the EUR/USD is still slightly above the 1.08 level.

Due to the positive retail sales data, the pound kept a portion of its gains and the GBP/USD remains near the level of 1.25. The pound was also supported by the CBI survey, which was conducted among 116 British companies (including 65 retailers). Companies expect retail sales to increase in April.

Zloty remains in a positive condition

The zloty remains strong and increased approximately 0.5% against the forint. Moreover, the zloty remains stable against the pound, despite the global strength of the British currency. The zloty also remains strong against the dollar, the franc and the euro.

The National Bank of Poland published the minutes from the previous meeting of the Monetary Policy Council. The Council left interest rates unchanged. Moreover, according to the MPC members, the risk of exceeding inflation goal in the mid-term is limited and stabilization of interest rates is favorable for keeping the Polish economy balanced.

The majority of the Council’s members estimated that stabilization of interest rates in the forthcoming quarters is likely. The minutes do not contain unambiguous signals that some members have been considering monetary tightening. Such a statement would strengthen the zloty. Nevertheless, the zloty’s reaction to the minutes was limited.

Tomorrow’s events

IHS Markit will publish data regarding industrial and services PMI for March, for both Germany and the eurozone. Even though these indexes were slightly disappointing in February, they remain in the upward trend. A positive situation in the eurozone has also been confirmed by a positive trend in both the consumer sentiment and the business sentiment (Ifo, GfK, sentix).

The German data will be published at 9.30 and the eurozone’s data will be revealed at 10.00. The market consensus regarding the industrial PMI is at the level of negative 0.3 points and negative 0.1 points, respectively. When it comes to the services PMI, the estimates are at the level of positive 0.2 points (Germany) and negative 0.2 points (eurozone).

The recent market events appeared to be relatively positive for the euro. Primarily, the European Central Bank sent hawkish signals and secondly, the FOMC message has become less hawkish. If the upward trend in all of the above mentioned indexes is sustained, the market will receive arguments for strengthening the euro.

At 14.45, Markit will publish the initial PMI data from the American economy. The data for February indicated the activity reduction in both sectors. Even though the market estimates an increase for March, the consensus is still below the maximum since January.

Taking into consideration the limited amount of macroeconomic readings this week, the PMI data may increase fluctuations on the dollar. However, even if the reading is better than consensus, the dollar’s appreciation will be limited.