No major changes (Afternoon analysis 14.03.2018)

14 Mar 2018 14:44|Bartosz Grejner

Retail sales failed to meet market expectations for the second month in a row, suggesting a lower level of private consumption in the US. No dollar appreciation was a good sign for the zloty, which has been weakened by internal factors.

US data didn’t impress

The Polish currency remains under internal pressure stemming from the Monetary Policy Committee’s dovish message with regards to possible interest rate hikes and lowered inflationary pressure. However, a still-weak dollar and no fast growth in US treasury yields have been helping the zloty of late. Otherwise, the Polish currency would be most probably under more significant pressure, together with other emerging market currencies.

The worse-than-expected data that came from the US today were welcomed by the zloty. Although producer inflation (PPI) was in line with market expectations, retail sales in February, which could be a good indicator of private consumption, failed those expectations. Sales were down by 0.1% month-on-month for the second consecutive month, while an increase of 0.3% was expected. The core index (excl. sales of vehicles) fared slightly better – a monthly growth of 0.2% was only 0.1 percentage points below market consensus.

This could limit the growth potential of the dollar today. On the other hand, the euro’s growth potential could also be limited as industrial production in January in the euro area missed expectations (2.7% year-on-year vs. 4.4%) and Mario Draghi (ECB president) delivered a dovish speech with regards to inflation and the asset purchase program.

It could work as a counterbalance to the weaker US retail sales data, which could result in oscillation of the main currency pair (EUR/USD) near the current level (approx. 1.237). This could also help the Polish currency to stabilize, which was only marginally stronger today in relation to most currencies, bearing in mind that there are no significant events planned for the coming hours.

Tomorrow’s preview

The Central Statistical Office (GUS) will publish a report on consumer inflation (CPI) in February in Poland. The index in January fell to 1.9% on a yearly basis (0.2 percentage points less than a month earlier). The median of market expectations points towards a further decrease to 1.8%. This would fall in the trend of a lowered inflationary pressure in the economy, which was also reflected in the latest inflation projections by the National Bank of Poland.

Also, the last press conference after the meeting of the Polish MPC was dovish, due to the aforementioned lowered inflation, which translated to lower chances of interest rate hikes in this or next year. The zloty has been in a relatively weakened state of late, reacting nervously to macroeconomic data. Should the CPI index come below market expectations, the data could give another argument to weaken the zloty.


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This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without the written permission from Cinkciarz.pl Sp. z o.o is prohibited.

See also:

14 Mar 2018 12:41

Politics in the spotlight (Daily analysis 14.03.2018)

13 Mar 2018 15:39

Inflation didn’t surprise (Afternoon analysis 13.03.2018)

13 Mar 2018 12:41

Weaker zloty (Daily analysis 13.03.2018)

12 Mar 2018 15:15

Zloty starts with falls (Afternoon analysis 12.03.2018)

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