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Daily analysis 13.12.2013

, Autor:

Marcin Lipka

EUR/USD receives another punches – very weak data on industrial production from Euro Zone and strong reading of retail sale from USA. Is “tapering” getting closer? Zloty is stable in relation to euro. Chances of 3.00 level test on USD/PLN are decreasing.

Most important macro data (CET). Macro data estimations are based on Bloomberg's information, unless marked otherwise.

  • Apart from the market consensus, we will publish the expectations division for some macro data. It often happens that the market reaction is biggest when the macroeconomic reports are beyond extreme prognoses range.
  • 14.00 CET: Balance of current turnovers calculation from Poland. According to PAP survey it should be 518 mln euro.

Data and QE perspective

EUR/USD did not managed with the pressure of weak macro data published in Euro Zone and positive macroeconomic reports for dollar coming from across the Ocean. Despite negative information though, the decrease of main currency pair was relatively small – about 50 pips. Today morning we have again returned above the level of 1.3750, but the decrease pressure generated by worse and worse informations from Europe and increasing possibility of “tapering” in December might effectively limit the chances for new heights.

A big surprise was yesterday's publication on industrial production of Euro Zone from October. Instead of the expected small increase (about 0.2%) we have observed a decrease of 1.1% in relation to September 2012. Paul Hannon from „The Wall Street Journal” says that apart from expected decrease of production in energetic sector caused by temperatures higher than usually, we were also negatively surprised by consumption goods, both lasting (cars, electronics) and non-lasting usage (food, clothes), which have decreased in relation to previous month respectively 2.4% and 0.9%. If these data will not get better the prognosis of economic growth and inflation for 2014 presented lately by ECB, can be threatened. That way European Central Bank will be under a significant pressure, not only to decrease the interest rates again, but also to introduce non-standard elements of monetary policy (sale of assets, negative interest rates, new LTRO operations) in order to reanimate inflation and growth. This fact, not depending from the general positive sentiment in relation to European currency, should significantly overrate euro. Future falls of EUR/USD can be caused on the other hand by faster than predicted economic growth in USA. There, on the opposite to Euro Zone, macro reports are surprisingly good. Yesterday's readings of retail sale were not only better than predictions (+0.7% m/m vs prognosis +0.6% m/m; excluding vehicles: +0.4% vs 0.2%), but also the report from previous month was revised up. This of course gets us closer to beginning of exiting from amount loosening in December, because perspectives of economic growth as well as current data are getting better. Also last Congres's agreement on budget (debt limit raising case still waits for solving) gets us closer to faster than previously expected exiting the assets buying.

In conclusion, not depending from the general strength of EUR/USD and lately given reasons of its high levels, another series of good macro data from USA and perspectives of faster exiting from amount loosening, should enforce the dollar. On the other hand, the growing weakness of European economy will cause the limitation of growth aspirations of common currency first, and then result in breaking the growth trend present since few months.

Zloty traditionally stable

National currency in relation to euro has not went through bigger changes, according to the trend lasting since few weeks. All the time we are in the areas of 4.18 per European currency. The situation in relation to the dollar can change a bit. Chances for level 3.00 test can clearly decrease, because of decreasing possibility of EUR/USD exiting on new heights.

Data on payment balance should be today in the centre of attention. The lesser deficit on current turnover calculation in PLN, the bigger resistance for future shocks (for example connected with tightening of monetary policy in USA). Another interesting thing is will the national economy manage to keep the plus balance of goods exchange in October.

In conclusion, zloty will remain stable in relation to main euro, but there is a bigger possibility of increase movement on USD/PLN.

Expected divisions for zloty pairs determined by EUR/USD rate:

EUR/USD rate 1.3650-1.3750 1.3750-1.3850 1.3550-1.3650
EUR/PLN rate 4.1600-4.2000 4.1600-4.2000 4.1600-4.2000
USD/PLN rate 3.0300-3.0700 3.0000-3.0400 3.0600-3.1000
CHF/PLN rate 3.3800-3.4200 3.3800-3.4200 3.3800-3.4200

Expected divisions for zloty pairs determined by EUR/USD rate:

GBP/USD rate 1.6250-1.6350 1.6350-1.6450 1.6150-1.6250
GBP/PLN rate 4.9700-5.0100 4.9900-5.0300 4.9500-4.9900

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