Daily analysis 13.04.2016:
Weaker yen is pushing the capital flow towards the dollar and put downward pressure on the EUR/USD. Uncertain signals for the crude in the recent hours. The zloty remains fairly weak despite positive global sentiment.
- 14.00: Balance of payments from Poland (survey: current account balance: +459 million euro).
- 14.30: Retail sales from the US (survey: +0.1% m/m and +0.3% m/m excluding cars and gasoline.
- 20.00: Beige Book from the US.
A significant downward pressure has been observed on the Japanese currency in the recent hours. The USD/JPY rose around 100 pips from yesterday and topped 109.20 mark. There was no major news which started the yen slide, but it is possible that new projections from the IMF put some pressure on the currency. The Fund expects that Japanese economy will shrink in 2017.
It is also possible that the JPY is driven by sellers due to better than expected data from China. But much higher export was fairly easy to predict taking into account how volatile are trade reports around Chinese lunar year (we wrote about it last month). The holiday is either in January or February so the publication might be disturbed even in April until all seasonal issues dissipate.
Regardless, the reason which pushed the JPY lower the move generated some buying pressure on the dollar. As a result the EUR/USD dropped toward 1.1300 level. Regarding the future “greenback” behaviour it is worth noting that the today’s retail sales publications from the US. If the data fails to meet expectations the GDP reading for the first quarter from the US might be really disappointing. It may keep the dollar under pressure for longer due to reduced expectations for the June interest rate hike.
In the recent hours the oil market generated many signals. Yesterday Interfax news agency reported that before Doha meeting Saudi Arabia and Russia have already agreed on the production freezing deal. It should be regarded as oil positive report.
A few hours later the EIA reported its monthly energy outlook. Analysing the data it is wroth noting that the April oil output projections were revised significantly to the downside. In March the EIA estimated average daily crude production for 2016 at 8.67 million barrels and 8.19 for the following year. Now it is 8.60 and 8.04 respectively.
In 2015 the US produced 9.43 million barrels a day. It means that the production may drop almost 1.5 million barrels a day in two years. If the estimate turns out to be true the global glut may be completely erased what should bring another upward pressure both on the WTI and Brent.
On the other hand, in the evening the API reported higher weekly inventory build-up in the US than the market participants expected. It suggest that today’s EIA report, which traditionally brings more attention to the market, can shows that the inventory may rise to all-time record high levels. As a result it might be negative signal for the crude oil.
Since this morning there have been contradicting reports regarding participation of Iran minister of oil in Doha meeting. Firstly news agencies citing Twitter messages from Seda reported announced that Bijan Namdar Zanganeh would not attend to the talks in Qatar. Later it turned out that the minister hasn’t made up his mind on Doha attendance.
We should expect that similar uncertain news will appear at least to the Doha meeting which is scheduled for Sunday. It is also worth noting that if more reports confirm the deal its future effect may be weaker when it is actually announced.
The zloty remains weak
The Polish currency remains quite weak. The zloty is not able to take advantage of better global sentiment or more bullish pound valuations which may suggest that Brexit risks slightly lessened. Additionally despite global euro weakness the EUR/PLN remains close to 4.30 level.
Weaker zloty condition is also clearly seen in comparison to the forint. The PLN/HUF dropped toward 72.50 which is the lowest level since almost a month. The zloty looks also much weaker to the dollar. The USD is moving to test 3.80 level.
As we wrote yesterday the risks for the zloty may mount further if the global sentiment deteriorates. Then both the EUR/PLN and USD/PLN may quickly rise above 4.30 and 3.80 respectively. Regarding today’s balance of payments publication it should not have a significant impact for the PLN valuation.
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