Afternoon analysis 28.04.2017

The American GDP growth was worse than estimated. However, the sentiment has been improved by a clear increase in investments. The global signals continue to be positive for the zloty.

The Bureau of Economic Analyses (BEA) informed that the initial GDP growth in the USA for the first quarter was at the level of 0.7% YOY. This was by 0.3 percentage points lower than estimated, as well as the lowest GDP growth in three years. The main result for this result was a very weak increase in the consumer expenses. Their contribution to the GDP in the first quarter was at the level of 0.23 percentage points, whereas over the past the past three quarters it was higher than 2 percentage points.

The consumption index increased 0.3% YOY, whereas its result from the previous quarter was at the level of 3.5% YOY. However, the dollar’s overvalue was not significant. This was most likely caused by an increase in the investment level (positive 10.4%), which may suggest a larger growth in the future. Moreover, the data regarding consumption might have been caused by statistical noise.

As a result, the profitability of the US treasury bonds increased slightly. This boosted the dollar’s value. The dollar’s index increased up to 98.9 points. However, the EUR/USD showed a relatively limited reaction and has remained near 1.09.

The above was also a result of positive data regarding the eurozone’s CPI. It’s baseline index has reached its highest growth level in approximately four years. The pound has also been stable, despite a worse than expected data regarding the British GDP growth for the first quarter.

Zloty remains strong

The zloty has been stable today, except for its quotations against the dollar. This condition was supported by the data from the Polish Central Statistical Office (GUS), which informed that the CPI for April was at the level of 2% YOY. This was consistent with the consensus.

When it comes to the USD/PLN, this paur went down from 3.98 to 3.855 before noon. Nevertheless, the American GDP data caused the dollar to increase slightly (3.88). The USD volatility will most likely continue next week, when we will receive significant data from the American economy.

Next week’s events

Next week will be significant for the dollar. On Monday at 14.30, we will receive inflation data from the American market for March. The Bureau of Economic Analyses (BEA) will publish the PCE data, which the Federal Reserve uses for their inflation forecasts.

Also on Monday (at 16.00), we will receive the industrial ISM for April. Over the past few days, the dollar has been fairly volatile due to political tension between the USA and North Korea, a plan regarding fiscal changes and the uncertainty regarding the future of the NAFTA. The above mentioned data can increase fluctuations of the American currency.

On Tuesday, the ADP will publish the data regarding employment in the non-agricultural sector. Over the past three months, the readings of this index have been showing growths above the level of 250k, which was significantly better than estimated. If this data is at a similar level, this would confirm an improving condition of the American labor market and strengthen the dollar. Nevertheless, it’s worth noting that the previous ADP data was significantly inconsistent with the official data from the Labor Department.

On Friday, the American Labor Department will publish its monthly labor market report. The most surprising element of the previous report, was the above mentioned data regarding the non-agricultural sector. However, this was most likely a result of statistical noise. Currently, investors will most likely focus on the hourly wage growth. Previously, this index was at the level of 0.2% MoM. If the report shows the hourly wage growth at the level of at least 0.3% and the employment growth goes above 150k, the dollar would gain value.