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Afternoon analysis 12.11.2015

, author:

Marcin Lipka

Data from the American labour market support the scenario of hikes. The zloty continues to wear off due to intensification of aversion towards risk. Tomorrow the GUS will publish data regarding the economic increase.

This morning brought a clear wear off on the euro, due to the testimony of Mario Draghi. The Chairman of the European Central Bank left an open door to increase the monetary stimulation during December's meeting. Draghi also pointed out the wear off on positive tendencies of base case inflation (with the exclusion of food and fuel), and said that the EBC always allowed the possibility to extend the purchase of assets beyond September 2016.

Additionally, Mario Draghi estimated that currently the perspective of inflation's return to its goal seems more distant than it was in March when the EBC decided to begin the purchase of assets. Thus, in the first part of the day, the euro went below 1.07 for a moment. Later, the EUR/USD rate began to work off the losses.

Some significant information related to extending the purchase of assets, was brought today by the Reuters agency. Sources from the EBC inform that the central bank is considering the purchase of municipal bonds of the cities and regions. This market's value is 500 billion euros. The local German governments are the biggest issuers of these bonds. This solution could convince the Bundesbank to increase monetary stimulation.

Solid labour market

Data from the American labour market were slightly worse than expected. The amount of jobless claims was 276k, which was the same as last week's result. Despite the weaker result, the report shows a strong revival on the labour market. Any result below 300k confirms such a situation. The companies are not dismissing employees because they expect the positive tendencies in the economy to be maintained.

This result supports the scenario of the monetary policy tightening in the United States. However, it did not clearly translate to the EUR/USD rate. This situation is a result of the fact that the future decisions regarding the monetary policy are already very much reflected in the prices. Thus, a chance for short-term movements as a reaction for published data is currently definitively smaller. Especially, if the reports regard the American economy, in which the situation is definitely clearer than in the eurozone.

The discrepancy between the Federal Reserve and the European Central Bank is a factor that will determine the behaviour of the main currency pair in the long-term.

Zloty wears off before the GDP

On Friday, the Central Statistical Office will reveal the initial data regarding the GDP in the third quarter. The economy is expected to increase by 3.3% in year on year relation. This result would be the same as the pace of increase reached in the second quarter. From a long-term perspective this result is not really satisfying. However, considering the external conditions it is relatively good.

On Thursday, the zloty was under depreciation pressure. The Polish currency was harmed by an increase in aversion towards risk on the wide market. However, to a certain degree this movement has a correctional character after a strong enforcement in this week's three previous sessions. In the long perspective, the PLN rate will be determined by the tendencies occurring on the wide market, as a result of the policy conducted by the EBC and the Fed.


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.

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