Afternoon analysis 23.11.2016

, author:

Bartosz Grejner

Orders for durable goods are positive and strengthen the dollar. The zloty wears-off due to the global strengthening of the dollar, as well as to an increase in profitability of the American bonds.

Dollar at its new peaks

Today, the American Census Bureau published a report regarding orders for durable goods in industry for September. This index increased by 4.8% MoM, which is significantly more than the market consensus at the level of 1.5% MoM, as well as the highest since March 2015. The base case reading increased by 1% MoM, which was also definitely better than expected (0.2% MoM).

The largest growth has been quoted in transport equipment orders (12% MoM) and capital goods orders (12% MoM). However, after excluding plane orders, the latter index only increased by 0.4% MoM and went down 4% YoY. Moreover, the American Labor Department published new jobless claims data (251k), which appeared to be near the market consensus (250k). Let’s add that this index’s previous reading was at its lowest level in more than forty years (235k).

This data caused a sudden increase in the dollar. The dollars index reached its new thirteen-year maximum (101.9). The euro increased its decline against the dollar and the EUR/USD reached the area of its level from the beginning of December 2015. The American currency also strengthened against the Japanese yen, which was at its highest level since April. There were also significant moves in the American bond market. Two-year bonds reached the level of 1.135% and thirty-year bond were slightly above 3%.

Zloty is under impact of global sentiment

The zloty was relatively stable during the first part of the day. However, this situation changed due to a sudden increase in value of the dollar, as well as of the American bonds. Declines on the zloty are a result of the global sentiment. However, the Polish currency gave away a portion of its gains against the forint as well.

This suggests that not only the global sentiment is responsible for the zloty’s worse quotations, but also its internal weakness. The dollar is yet again near its fourteen-year maximum (4.20 PLN). The pound went up as well (5.20 PLN). The franc’s price reached its yesterday’s peaks (4.13 PLN). However, the zloty is doing relatively good against the euro (4.43 PLN). This was only 0.02 PLN lower than before the above mentioned moves on the dollar and the American bonds.

Tomorrow’s events

November 24th is Thanksgiving Day in the United States. Therefore, the American stock exchange market is closed on that day and because of this there will be less volatility in the market. However, we will receive some significant data from Germany tomorrow. At 8.00 AM, Destatis will publish the second GDP reading for the third quarter. After a 3.1% YoY (0.4% QoQ) growth in the second quarter, the initial GDP reading for the third quarter was slightly disappointing (1.5% YoY and 0.2% QoQ).

The index not only appeared to be worse than it was in the previous quarter, but it was also worse than the market expectations (positive 1.8%). This is especially taking into consideration that the recent macro data from the German economy was positive. A positive second reading could confirm this and strengthen the euro, which is currently weaker due to the global sentiment. This would be a positive information for the zloty as well, because Germany is one of Poland’s main trading partners. The market expects the GDP growth to be at the level of 1.7% YoY and 0.2% QoQ.

At 10.00 AM, the Ifo institute will publish the German business sentiment index for November. This index consists of subindexes that concern the current situation, as well as the future expectations. Moreover, it has currently been in an upper trend since the year’s beginning, as well as since October 2012, when it was at the level of 100. In October, it reached the level of 110.5, which was its highest level since March 2014 and relatively close to its highest value since 2014 (111.3). The market assumes that this index will remain near its level from the past month. However, it was better than expected in two previous months.

At 1.00 PM, GfK will publish consumer trust index for December. Even though its two previous readings were slightly worse than expected (10.0 for October and 9.7 for November) it still remains near its fifteen-year maximum. This year’s highest level of this index was quoted in September (10.2). The market expects that this index will remain near its previous level. If the Ifo and GfK indexes remain at their current, high level, this would be positive for the German economy, as well as for the euro. This would suggest that entrepreneurs, as well as consumers have trust in the German economy and its future condition.

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 Sp. z o.o is prohibited.

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