Afternoon analysis 26.01.2017

The jobless claims index increased more than expected, just as the deficit in the American trade. The dollar is gaining value. The zloty remains in a positive condition.

Dollar is stronger

Today, the American Labor Department informed that last week’s jobless claims increased unexpectedly by 22k (259k), whereas the consensus assumed a 12k depreciation. However, this result remains to index’s historical minimum from the beginning of November (233k). The four week average went down to 245.5k, which was its lowest value since November 3rd, 1973.

The deficit of the trade balance for December was 0.5 billion dollar lower than the market consensus, but 0.3 billion dollars higher than in November. Its result was 65 billion dollars. Eventually, the general balance was close to its previous level due to a 3 billion dollar increase in the capital goods. Export increased by approximately 3.7 billion dollars and import went up by approximately 3.4 billion dollars. This growth was mainly caused by the vehicle import (positive 1.6 billion dollars).

Approximately twenty minutes after the announcement of the above data, President Donald Trump tweeted that the American deficit in trade exchange with Mexico is at the level of 60 billion. Moreover, he claimed that NAFTA has always been a unilateral agreement and it has costed the American economy several workplaces. Trump also suggested that if Mexico does not want to pay for the wall on the Mexican-American border, they should cancel his the forthcoming meeting with Enrique Nieto (the Mexican president).

As a result, the Mexican currency wore-off and the USD/MXN went above 21.28. The dollar started gaining value, shortly before the economic data. However, negative readings stopped its appreciation. Despite that, the EUR/USD was pushed from 1.07 to 1.067. Moreover, the dollar’s index (DXY) climbed from 100 to 100.5.

Euro goes below 4.34

The zloty remains relatively strong, which is indicated by its quotations against the euro, as well as against the forint. The EUR/PLN went below 4.34. However, it quickly returned above this level. The PLN/HUF went above 71.74. However, the globally stronger dollar caused the USD/PLN to reach 4.07.

Today, the National Bank of Poland published the minutes from the recent meeting of the Monetary Policu Council (January 11th). The Council’s members emphasized the recently dynamic increase in prices. However, they also indicated that this has been a result of external factors and their impact should be limited in the future. Moreover, they expect that a real level of interest rates will go down as inflation grows. This should support a higher pace of the economic growth. Recently, Adam Glapiński (the MPC chairman) said that rate hikes most likely will not be taken into consideration until 2018.

Tomorrow’s events

Tomorrow’s main event is the reading regarding the American GDP growth for the fourth quarter. This will be announced at 2.30 PM by the Bureau of Economic Analysis. The GDP growth for the third quarter was a positive surprise for the market (3.5% QoQ) and translated to strengthening of the dollar’s value. The market consensus before the initial data was at the level of 2.6% QoQ, while the initial reading was at the level of 2.9% QoQ.

Currently, the market consensus is at the level of 2.2% QoQ. To compare, the GDP growth for the fourth quarter of 2015 was at the level of 1.4% QoQ. High GDP growth could confirm a relatively positive trend in the American economy and strengthen the dollar.

At 2.30 PM, the Census Bureau will publish the new orders data for December. This index has been increasing for five consecutive months, even though that it has been historically volatile. The market consensus is at the level of positive 0.5% MoM (excluding transport). However, this data is most likely to be pushed aside by the GDP growth reading.

At 4.00 PM, we will know the University of Michigan consumer sentiment index for January (the second reading). Initial data (two weeks ago) indicate its highest growth in more than twelve years (112.5 points). This was mainly fueled by the election of the new American president. In order to sustain this result, the new administration will most likely have to fulfill what has been promissed during the presidential campaign.