Daily analysis 23.11.2016

Positive signals from the euro zone’s accelerating indexes. The Fed’s minutes may be ignored today, because the meeting was held before the American elections. The zloty remains weak against the main currencies, but it’s working-off a portion of its losses against the forint.

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

• 14.30: Orders for durable goods from the USA (estimations: positive 1.7% MoM; excluding transport: positive 0.2% MoM).
• 14.30: Weekly jobless claims from the USA (estimations: 250k).
• 15.45: Initial PMI for the American industry (estimations: 53.5 points).
• 16.00: Sale of new houses in the USA (estimations: 590k).

Currency market ignored positive data

We received the PMI readings for Germany, France and the entire euro zone this morning. Their results were relatively close to its previous readings, as well as the consensus. However, it’s worth noting that the details of reports, which were made by Markit IHS, were really positive. This may suggest an improvement in the euro zone’s business cycle in a break of 2016 and 2017.

Collective PMI for Germany remains near 55 points. This means that the business cycle in services, as well as in industry is relatively positive. IHS Markit emphasized a strong increase in production and in employment. In his data commentary, IHS Markit senior economist, Chris Williamson, claims that the German economy should increase by 0.5% in the fourth quarter.

The situation in France improved as well. The country’s collective production index had returned above the level of 52 points. The PMI report states that employment growth was the fastest since June 2015. On the other hand, the index of orders within private sector was the best in seventeen months. Business perspective index is also positive, even though surveyed company managers estimate these perspectives as the worst since the beginning of the year.

Due to the fact that initial PMI data was published today, there are still no detailed readings for the other six countries of the euro zone. However, taking into consideration diagrams that were included in the report, the situation of the peripheral states of the euro zone should clearly improve. This is a positive signal.

There was no reaction from the market to the Markit publications today. This may be a result of the fact that investors are already focused on the decision from the ECB in December (PMI will have a minor impact on the European monetary authorities.) Moreover, moves on the dollar have become a dominant catalyst in the global market. This decreases a potential impact of the euro on the other currencies. As a result, the EUR/USD remains near 1.0600.

Will minutes be ignored?

The American data will be published this afternoon. This data will include orders for durable goods and jobless claims, which will exceptionally be published on Wednesday and not on Thursday. Taking into consideration the market sentiments, positive data most likely will support the dollar. On the other hand, slightly weaker readings shouldn’t cause a clear wear-off of the USD.

However, minutes from the Fed’s meeting in November shouldn’t cause a significant reaction of the market. This discussion within the FOMC took place before the American elections. Trump’s victory, as well as the Republicans taking over the Congress, have clearly changes investors’ approach towards the future interest rates. Therefore, the reaction on the USD may be slightly dimmed this evening.

Slight improvement on PLN

The zloty remains weak against the main currencies at approximately noon. The euro costs approximately 4.42 PLN and the dollar is at the level of 4.16 PLN. However, minor increases in the PLN/HUF can be considered as positive. This may suggest that investors are beginning to vary their negative attitude towards the PLN, as well as towards the Polish bonds.

The behavior of the American debt instruments, as well as of the dollar in the global market, remains crucial within the perspective of the forthcoming weeks. If expectations towards the future interest rates in the USA continue to grow and the EUR/USD goes below 1.05, the euro will probably return to the area of 4.45 PLN. In this scenario, the dollar will reach its fourteen-year maximum against the zloty, as well.