Daily analysis 30.03.2017

The Fed members have been making attempts to sustain the scenario of at least three rate hikes for this year. Low inflation from particular states of Germany, as well as the most recent news from the ECB, have caused pressure on the EUR/USD. The zloty remains strong. The EUR/PLN has been near its one-year minimum.

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

• 14.00: Initial inflation data from Germany for March (estimates: 1.8% YOY).
• 14.30: Final GDP reading from the USA for the fourth quarter (estimates: 2.0% QoQ in annualized interpretation).
• 14.30: Weekly jobless claims from the USA (estimates: 247k).

Fed’s attempts

Yesterday’s discussion regarding Brexit eclipsed other significant information from the currency market. This includes the news from Reuters, which states that the previous message from the Ecb representatives has been over-interpreted.

There were no suggestions regarding sooner rate hikes in the previous ECB announcement, nor at the ECB press conference. Moreover, this has recently been confirmed by the ECB senior economist, Peter Praet.

Three FOMC representatives made their testimonies yesterday. The most interesting and at the same time the most unambiguous of them, was Eric Rosengren’s testimony. He wrote that, “I view four increases this year as fully consistent with comments from FOMC participants stating that the path of normalizing rates will be gradual.”

Statements from John Williams can also be interpreted as hawkish. The San Francisco Fed chairman’s views have been very often similar to Janet Yellen’s. He claimed that, “my own view is similar to most of my FOMC colleagues.” However, he emphasized that due to the chances for a more rapid economic growth, he can’t exclude more than three rate hikes for this year.

Taking into consideration that the general market sentiment is currently slightly worse than it was before voting over new American healthcare regulations, an unambiguous attitude from the Fed representatives should be positive for the dollar (especially against the euro).

German inflation

Today’s inflation for Germany is consistent with less favorable conditions for the EUR/USD. The data regarding the entire country will be revealed at 14.00. However, the readings for particular states of Germany indicate that inflation growth may be lower than expected (1.8% YOY).

In comparison to February, inflation for March has slowed down in Bavaria (2.1% YOY vs 1.7% YOY), North Rhine-Westphalia (2.3% YOY vs 1.7% YOY), Saxony (1.8% YOY vs 2.4% YOY) and in Hesse (1.7% YOY vs 2.5% YOY). This clearly increases the likelihood of inflation reading to be lower than the consensus. Therefore, the temperature around the discussion regarding more rapid rate hikes from the ECB, should decrease.

Zloty is stable

The zloty’s quotations have been stable over the past few hours. The EUR/PLN remains near its one-year minimum. Even though the dollar is currently slightly higher, this was mainly caused by the global moves rather than by the zloty’s weakness. The PLN remains strong against the forint as well and the PLN/HUF is near its one-year maximum (73.30).

The zloty is the fourth strongest currency among the thirty currencies of developed and emerging markets. The only currencies that are stronger than the PLN are the Mexican peso, the Colombian peso and the Russian ruble. A similar appreciation scale against the zloty has been observed on the yen and the South Korean won. Until this global trend (expect for the yen) is sutained, the zloty’s condition should be relatively positive.