Daily analysis 14.04.2017

The dollar regained strength, but US treasury yields remained low. Key data coming from the US could increase volatility in the afternoon. Zloty appreciated slightly during the holiday trading. EUR/PLN just below the 4.25 level.

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

• 14.30 CET: USA CPI inflation (estimates: +0.0% MOM and +2.6% YOY; core index excluding energy and food: +0.2% MOM and +2.3%).
• 14.30 CET: US retail sales: (estimates: -0.2% MOM; core index excl. fuel and automobile sales: +0.3% MOM).

Stabilisation and positive consumer sentiment

Yesterday, EUR/USD nearly came back to levels seen before the publication of the interview with Donald Trump in the Wall Street Journal. It’s important to note that even though the US president has a limited impact on the creation of the monetary policy and on the dollar, comments such as his can cause uncertainty on the market as to the action of the new administration in regards to the economy. That would pose a more serious problem and some market participants have started to fear just that.

It can be even better seen in the case of US treasury bonds than it can in the case of the euro to dollar relation. Yields on treasury bonds virtually haven’t regained ground after the WSJ interview. It could point to the market believing in less of a sustained increase in inflation and economic growth than it did before before.

Good consumer confidence data in the US also hasn’t managed to improve that. University of Michigan Consumer Sentiment advanced to 98 points (consensus was 96.5 points) and was close to reaching new 14-year highs. In the survey, households were still very optimistic as to future economic conditions in the next five years. They also expressed an increased propensity to buy new durable goods. The problem for the economy is, of course, whether such actions will come to fruition. We recently pointed out that survey indexes less and less coincide with “hard” economic data (especially in the European Union).

Important data from the US economy

Despite US markets being closed today, important macroeconomic data will be published nonetheless. At 14.30 CET. data regarding consumers inflation (CPI) in March will be made public. Economists surveyed by Bloomberg expect a reading between 2.6% and 2.7% YOY. Lower commodities prices from a year ago will most probably have less impact this month.

The more important reading for the market will be the core inflation index – and here could be the surprise. The index excluding energy and food prices is expected to increase to 2.3% YOY. However, should this reading be exceeded by as much as 0.1 percentage points, this could mean the highest level since 2008. This could lift the dollar, especially because there’s no activity today on the bond market. In such a case, the hypothetical effect in the bond market could be taken over by the dollar, which could, in turn, increase its expected appreciation.

As for the retail sales data, the most important will be the reading excluding automobiles and fuels. Car sales have visibly slowed down in the US as of late, however, this information should be already priced in. Investors will probably focus on core retail sales without the relatively volatile data. It could also suggest how the survey data will relate to real consumer spending.

Zloty has been stable

During the last few hours, zloty’s condition remained fairly stable. It appreciated slightly before midday in relation to other currencies. The EUR/PLN was only just above the 4.24 boundary and the PLN/HUF pair reached levels close to 74. Should this level be exceeded, it would mean testing the highest level in relation to the forint since the end of 2015.

The next hours should be fairly calm for the zloty. The volatility could increase around the publication of the mentioned above US data. If they fail expectations (lower retail sales and inflation), the Polish currency could gain in relation to the dollar in particular. Conversely, the American currency could come back to levels above 4.00 in the case of the USD/PLN).