Afternoon analysis 27.10.2016

27.10.2016 15:57|Bartosz Grejner

The CBI survey conducted among 126 companies (including 60 retailers) shows the highest pace on retail sales growth in the United Kingdom in one year. The American data regarding jobless claims and orders for durable goods had a minor impact on the dollar. The zloty is gaining value in the afternoon.

The CBI survey conducted among 126 companies (including 60 retailers) shows the highest pace on retail sales growth in the United Kingdom in one year. The American data regarding jobless claims and orders for durable goods had a minor impact on the dollar. The zloty is gaining value in the afternoon.

Retail sales in the UK is growing, but probably not for long

Today, the Confederation of British Industry (CBI) published a report regarding retail sales. It showed the most rapid growth pace in one year. An increase in sales was indicated by 40% of respondents and 19% indicated a decrease. This has given a positive balance of 21%. The reading was better than expected, as was the reading from last month (7% and negative 8%, respectively).

Better data was mostly caused by an increase in sales of clothes (positive 71%), furniture and carpets (positive 83%), and tools and equipment (positive 45%). Positive sales data was also quoted by wholesalers, because 57% of them indicated an increase in sales and 15% indicated a decrease. This gave a positive balance of 42%, which was the highest result since July 2015.

According to the survey, this trend will continue next month. This is because 38% of respondents are expecting an increase in sales and 18% are expecting a decrease. This gives a balance of positive 21%. However, a record low pound will most likely impact an increase in prices during the forthcoming months, which would cause limits in consumers’ purchase power. This could limit the retail sales growth scale.

Negative data from USA

According to the American Labor Department, the jobless claims data was worse than expected (285k vs expected 255k). However, it’s still 3k below last week’s reading. Let’s keep in mind that these are still historically low levels (near forty-year minimum). This was also the 86th consecutive week with a reading below 300k. This is the longest streak since 1970.

At 14.30 (2.30 PM), the Census Bureau published the data regarding durable goods. This index went down by 0.1% in September (0.3 billion dollars), which was its first decline in three months. However, it contains a very volatile transport sector, which impacted the final negative result. The base case reading (excluding transport) was at the level of positive 0.2% and was consistent with the market consensus. There was also a positive revision of the base case index from negative 0.1% to positive 0.1%.

The above data appeared to be slightly below the market expectations. However, this had a minor impact on the dollar. The EUR/USD remains above the 1.09. level. Investors are most likely anticipating the GDP readings for the third quarter tomorrow.

Zloty is getting stronger

The Polish currency began to gain value this afternoon. However, these changes were within the volatility range we have been observing since last week. After a test of the 4.00 level this morning, the CHF/PLN strengthened slightly and the franc was at the level of 3.988 PLN this afternoon. Positive GDP data from the United Kingdom strengthened the pound (4.86 PLN). However, the British currency began to wear-off shortly afterwards and went down to the level of 4.84.

Tomorrow’s data regarding the American GDP may cause some more volatility on the USD/PLN. Currently, the dollar costs 3.96 PLN. If the reading is better than expected, the dollar may go towards the level of 4.00. However, if the data appears to be more than 1% below the market consensus, the USD/PLN may return to the level of 3.90.

Tomorrow’s events

At 14.00 (2.00 PM), the German Federal Statistic Bureau will publish the CPI data for October. The market estimates are at the level of positive 0.8% y/y (against positive 0.7% in September) and positive 0.2% m/m (against positive 0.1% in September). The month on month readings may be relatively volatile. However, the year on year interpretation shows a clear inflation growth trend to the negative level (negative 0.1%), which has been observed since March. This is positive information for the German economy because its consumer trust is high and growing (according to the Ifo and GfK data). The positive condition of the German economy is good news for the Polish economy as well. This is because Germany is one of Poland’s main trading partners, which eventually translates to economic growth in Poland.

Tomorrow’s main event is the American GDP data for the third quarter. This will be published by the Bureau of Economic Analyses at 14.30 (2.30 PM). The market consensus assumes the reading at the level of 2.5% q/q. This would be the highest increase in quarter interpretation since December 2015. The recent positive data from the American economy gives the ability of thinking that this reading will be relatively high and near the consensus.

The American economy is accelerating. However, its pace is still slow, even in comparison to the period shortly after the 2007/2008 financial crisis. If the data is at least near the consensus, this may cause the dollar to strengthen. This would increase the likelihood of rate hikes in December. According to CME calculations (based on the Fed rate contracts), the current likelihood is at the level of 72%.


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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 Sp. z o.o is prohibited.

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