Daily analysis 02.05.2017

The dollar was not supported by American data. The British industrial PMI was better than expected and has slightly supported the pound. The zloty has been strong and stable. The euro remains near the 4.22 level. The Polish industrial data appeared to be quite solid.

Most important macro data (CET – Central European Time). Estimates of macro data are based on Bloomberg information, unless marked otherwise.

• Tomorrow at 11.00: The eurozone’s GDP (estimates: positive 1.7% YOY).
• Tomorrow at 14.15: The ADP data from the American labor market (estimates: 175k).
• Tomorrow at 16.00: The American services ISM (estimates: 52.5 points).
• Tomorrow at 20.00: The decision regarding the American interest rates (estimates: no changes 0.75-1.00%).

No support for dollar

Friday’s data regarding the American GDP growth for the first quarter was most likely distorted by seasonal factors. However, yesterday’s readings may cause concern over the American economic revival, as well as over inflation growth.

In March, the average wage rate in the USA increased 0.2% MoM, whereas the estimates were at the level of 0.3% MoM. In addition, the data for February has been revised from 0.4% to 0.3%. The PCE baseline inflation decreased to the level of 1.56%, which was its lowest result in one year. This is significant information because the Federal Reserve uses the PCE readings for its macroeconomic forecasts.

The American industrial ISM data contained plenty of negative information as well. This index went down to 54.8 points, whereas the estimates were at the level of 56.5 points. Moreover, the previous reading was at the level of 57.2 points. More negative information was to be found in the data regarding new orders (a decrease from 64.5 to 57.5 points), as well as the employment rate (a decrease from 58.9 to 52.0 points). Some positive news is that new orders in export have been relatively high (59.5 points). This doesn’t change the fact that the amount of positive signals from the ISM have begun to decrease.

The above mentioned data is consistent with a worsening sentiment towards the dollar that we have been observing for a few weeks. The forthcoming days will be significant for the American currency. Tomorrow’s Federal Reserve meeting will most likely be quite similar to previous meetings. Nevertheless, negative macroeconomic data may prolong depreciative pressure on the dollar, in particular against the euro which has been regaining strength.

Surprisingly positive PMI from UK

Last week, we took note that despite the negative data regarding the British GDP growth for the first quarter, the production component was quite solid. Today’s data regarding the UK industrial PMI shows that these positive trends may be continued in the next months.

According to IHS Markit CIPS, this sector’s activity increased up to 57.3 points, which was its largest growth in three years. The demand increased within the country, as well as abroad. This was mainly caused by low evaluation of the British currency. Even though contribution of the industrial processing to the British GDP is at the level of 10%, this index’s relatively positive condition should limit the negative impact of Brexit.

Zloty remains stable

The zloty has been in a positive condition. The EUR/PLN remains near 4.22 and the PLN/HUF has been at the level of approximately 74. The latter shows the zloty’s strength against the region’s currencies. Moreover, increasing chances for a political stabilization within the eurozone have caused the EUR/CHF to reach the range of 1.08-1.09. This has also increased the chances for the CHF/PLN to be near the 3.90 level.

News from the local economy has also been positive for the zloty. In April, the PMI reached the level of 54.1 points, which has stopped this index’s depreciation trend. According to Markit IHS there was, “strong growth in output, new orders and employment.” The analysis also indicated that new orders in the foreign market accelerated as well. It was unofficially said that this was caused by economic revival in Europe. Taking into consideration both the external situation and positive news from Polish economy, the base case scenario is that the PLN will maintain its current level.