Afternoon analysis 30.04.2015

Still no breakthrough in the eurozone labor market. The reports from the US introduced confusion in the markets. The zloty declined against the euro and the dollar.

Thursday's reports concerning the US economy were mixed. Although the reading on unemployment claims was very good, other figures were less optimistic.

The number of unemployment claims dropped to 262k – clearly a lower result than projected. Last time the reading was equally low fifteen years ago. Given the report, the expansion in the labor market looks very strong. In turn, recent weakness in the labor market reading has been rather transitory.

However, other reports were rather negative. In spite of strong labor market expansion, the US households are not eager to spend the money. The US household spending growth stood at 0.4 percent ­ a result below expectations. Moreover, quite good labor market conditions are not coupled with the growth of wages as the household income growth was flat in March.

In addition, the numbers on PCE inflation growth ­ the major inflation measure for the Federal Reserve ­ missed the forecast. The price growth stood at 0.1 percent ­ less than predicted and below the pace of 0.4 percent in the previous month.

Given yesterday's data on the GDP growth (0.2 percent pace, below 1 percent that was projected) and rather a dovish message from the Fed (more on the issue in previous comments) one would have expected a weaker dollar. Meanwhile, the market reaction was opposite ­ since the data was released, the US currency posted gains against the euro and other major pairs.

After the beginning of the session in the US, the reading on the Chicago PMI exceeded the forecast. The measure of expansion in the Chicago region increased to 53.2 from 46.3 in the previous month. The report confirmed the opinion that recently seen slowdown in the US economy has been only briefly.

The EUR/USD reaction would have been caused by the willingness to close position after fife days of gains of the major currency pair. In addition, the reports from the labor market suggest that the slowdown have been transitory ­ thus the probability of more gains is rather limited.

No breakthrough in the eurozone labor market

Yesterday, the data on the credit growth in the private sector showed the first increased in three years. This is due to the European Central Bank that launched a variety of measures aimed at spurring the credit growth.

Until now, is has not been reflected in the labor market situation. The unemployment rate remained unchanged in March. It stood at 11.3 percent, which was still near its record high level. Moreover, the data on inflation also did not surprise ­ it was flat after dropping 0.1 percent in the preceding month.

Weaker zloty

Recently, the atmosphere in the global markets is rather negative. The US and the European markets posted losses. The deterioration of sentiment towards risk assets affected the zloty. The zloty dropped against all its major pairs, except the pound.

Still, as the outlook for the euro­zone is improving and the Federal Reserve will postpone interest rate hikes, the zloty remains in the position to continue its appreciation. If the risk aversion is limited, the zloty will return to gains against all its major pairs.