Lower readings of the American base inflation and a revision of data from January, decrease the chances for a quick monetary tightening. Inconsistent signals regarding the Brexit. The zloty remains stable to the euro, the pound and the franc.
Most important macro data (CET – Central European Time). Estimations of macro data are based on Bloomberg information, unless marked otherwise.
15.00: Changes in prices of houses in the USA according to the S&P/CS index (estimations: +5.75% y/y).
16.00: Sentiments of the American consumers according to the Conference Board (estimations: 94 points).
18.20: Testimony of Janet Yellen, entitled “Economic perspectives and monetary policy.”
Downward revision of the data lays weight on the GDP
Monday's data regarding the American economy was a negative surprise. Before Easter, we took note that the publication regarding the PCE base inflation may be a significant element of the discussion regarding the policy of monetary tightening. However, it appeared that the revision of consumers expenses caught even more attention.
The consensus of economists assumed that the PCE inflation (with exclusion of fuel and food) will increase by 1.8% y/y. Additionally, after the CPI publication from February, which exceeded the market's estimations, we could count on a positive surprise. A totally opposite thing happened, and inflation remained at the level of 1.7%. This decreased the expectations regarding the hikes in the USA.
However, it is possible that the revision of data regarding consumers expenses from January was more significant. In initial reading, which was published in February, the American Department of Commerce informed that the data increased by 0.5% m/m. On the other hand, this value has been revised to 0.1% m/m yesterday.
This caused a significant downward revision of expectations regarding the GDP for the first quarter. The Atlanta Federal Reserve estimates in the GDPNow model that the American economy will grow in this year's first three months by 0.6% q/q in annualized interpretation. On March 24th, this estimation was +1.4%, and in the first two weeks of the current month it exceeded the value of 2.0%.
The recent information confirms that the dovish faction of the FOMC currently has more arguments. It is possible that today's testimony of Janet Yellen will cast some light on the matters of the monetary tightening. The topic of the testimony includes matters related to economy and monetary policy. Thus, we can see clearer moves on the American currency at approximately 18.20 (6.20 PM). However, arguments for sustaining the weaker dollar are currently a majority.
Is the Brexit closer or further?
In the past few days, new surveys regarding the Brexit were published. The average result of six surveys published by whatukthinks.org website, indicates that 48% of respondents are for leaving the European Union, and 52% want to stay within its structures. This suggests a slight increase in the amount of opponents of the Brexit (previously it was 51% against 49%).
However, it is worth noting that the above mentioned average contains the Survation phone survey, finished on March 19th. It shows that the British citizens who support remaining in the EU have an 11% advantage. On the other hand, in comparison with the survey conducted by the same institution one month ago, this advantage decreased from 15%.
Moreover, the ICM published the first online survey after the events from Brussels. The study, conducted between the 22nd and 24th of March, shows that 45% of British want to stay within the European Union, and 43% support the Brexit. However, the arguments regarding the economic security are, for the time being, not convincing enough for the United Kingdom's citizens. The previous ICM survey, finished on 20th of March, was advantageous for the Brexit supporters by 2%.
Two more elements add uncertainty regarding the result in the future. First of all, there is a high percentage of hesitant citizens. Currently, it is at the level of 20%, and shows increased tendencies. Also, in its recent study, the ICM takes note that only 47% of surveyed declare a definite will of participating in the referendum. The ICM emphasized that approximately three months before the parliament elections, 66% declare that they will participate.
Thus, even though the percentages of the Brexit supporters are not growing, the element of uncertainty is strong enough for this matter to be ignored in evaluation of the British currency.
Stabilization on the zloty
The Easter trade was calm on the zloty. Also, today before noon, no nervous moves were observed on any of the main currencies related to the PLN. Thus, we can expect that the quotations will remain at the current level until the end of the day. The only greater danger can be a nervous reaction of investors after Janet Yellen's testimony, and a significant overvalue in the capital market.
However, this scenario is very unlikely, because if the Fed chairwoman is as dovish as she was during the recent FOMC press conference, the dollar may lose value slightly, and a relatively good sentiment will remain in the stock markets. This would be a positive information for the PLN in the short term, especially in relation to the USD.
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 acknowledgement of the source is prohibited.
Lower readings of the American base inflation and a revision of data from January, decrease the chances for a quick monetary tightening. Inconsistent signals regarding the Brexit. The zloty remains stable to the euro, the pound and the franc.
Most important macro data (CET – Central European Time). Estimations of macro data are based on Bloomberg information, unless marked otherwise.
Downward revision of the data lays weight on the GDP
Monday's data regarding the American economy was a negative surprise. Before Easter, we took note that the publication regarding the PCE base inflation may be a significant element of the discussion regarding the policy of monetary tightening. However, it appeared that the revision of consumers expenses caught even more attention.
The consensus of economists assumed that the PCE inflation (with exclusion of fuel and food) will increase by 1.8% y/y. Additionally, after the CPI publication from February, which exceeded the market's estimations, we could count on a positive surprise. A totally opposite thing happened, and inflation remained at the level of 1.7%. This decreased the expectations regarding the hikes in the USA.
However, it is possible that the revision of data regarding consumers expenses from January was more significant. In initial reading, which was published in February, the American Department of Commerce informed that the data increased by 0.5% m/m. On the other hand, this value has been revised to 0.1% m/m yesterday.
This caused a significant downward revision of expectations regarding the GDP for the first quarter. The Atlanta Federal Reserve estimates in the GDPNow model that the American economy will grow in this year's first three months by 0.6% q/q in annualized interpretation. On March 24th, this estimation was +1.4%, and in the first two weeks of the current month it exceeded the value of 2.0%.
The recent information confirms that the dovish faction of the FOMC currently has more arguments. It is possible that today's testimony of Janet Yellen will cast some light on the matters of the monetary tightening. The topic of the testimony includes matters related to economy and monetary policy. Thus, we can see clearer moves on the American currency at approximately 18.20 (6.20 PM). However, arguments for sustaining the weaker dollar are currently a majority.
Is the Brexit closer or further?
In the past few days, new surveys regarding the Brexit were published. The average result of six surveys published by whatukthinks.org website, indicates that 48% of respondents are for leaving the European Union, and 52% want to stay within its structures. This suggests a slight increase in the amount of opponents of the Brexit (previously it was 51% against 49%).
However, it is worth noting that the above mentioned average contains the Survation phone survey, finished on March 19th. It shows that the British citizens who support remaining in the EU have an 11% advantage. On the other hand, in comparison with the survey conducted by the same institution one month ago, this advantage decreased from 15%.
Moreover, the ICM published the first online survey after the events from Brussels. The study, conducted between the 22nd and 24th of March, shows that 45% of British want to stay within the European Union, and 43% support the Brexit. However, the arguments regarding the economic security are, for the time being, not convincing enough for the United Kingdom's citizens. The previous ICM survey, finished on 20th of March, was advantageous for the Brexit supporters by 2%.
Two more elements add uncertainty regarding the result in the future. First of all, there is a high percentage of hesitant citizens. Currently, it is at the level of 20%, and shows increased tendencies. Also, in its recent study, the ICM takes note that only 47% of surveyed declare a definite will of participating in the referendum. The ICM emphasized that approximately three months before the parliament elections, 66% declare that they will participate.
Thus, even though the percentages of the Brexit supporters are not growing, the element of uncertainty is strong enough for this matter to be ignored in evaluation of the British currency.
Stabilization on the zloty
The Easter trade was calm on the zloty. Also, today before noon, no nervous moves were observed on any of the main currencies related to the PLN. Thus, we can expect that the quotations will remain at the current level until the end of the day. The only greater danger can be a nervous reaction of investors after Janet Yellen's testimony, and a significant overvalue in the capital market.
However, this scenario is very unlikely, because if the Fed chairwoman is as dovish as she was during the recent FOMC press conference, the dollar may lose value slightly, and a relatively good sentiment will remain in the stock markets. This would be a positive information for the PLN in the short term, especially in relation to the USD.
See also:
Afternoon analysis 25.03.2016
Daily analysis 25.03.2016
Afternoon analysis 24.03.2016
Daily analysis 24.03.2016
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