Afternoon analysis 15.04.2015

, author:

Piotr Lonczak

More disappointment after the US data. The ECB satisfied with the QE results. The Monetary Policy Council (MPC) maintains the interest rates and is not afraid of the strong zloty. The PLN strengthened.

The data from the American economy failed again. After the Tuesday disappointment with the retail sales data, today's industrial reports look below expectations. The production fell by 0.6 per cent in comparison to the last month - it is worse than the anticipated minus 0.3 per cent. Last month this indicator had the dynamic on the level of 0.1 per cent. The New York Empire report fell to -1.2 from 6.9 - worse than anticipated 7.1.

A closer look at the US data, which disappoint from the beginning of the year, indicates that the interest rates raises should be delayed until later this year. After the labor market report, along with the data from retails sales and production were below expectations, chances for raises in June are minimal. This factor weakens the dollar.

ECB stays on course

The European Central Bank decided on maintaining the basic parameters of the monetary policy. The institution aims at sustaining the zero per cent interest rates and continuing purchasing assets worth 60 billion euro every month.

During the press conference the ECB president, Mario Draghi assured that the current policy will be maintained until the inflation goal is reached and the threat to the economy is reduced. The chief of the European Central Bank is satisfied with the QE plan and its results which are more and mor visible.

Greece in the background

Yesterday's reports from the 'Financial Times' about Greece preparing for declaring bankruptcy did not manage to shake the market. This only confirmed this risk factor to be local and of low significance on the markets.

The situation, however, was mentioned in the media. Today the Slovakian minister of finance, Peter Kazimir assessed the chances for ending the Greek issue at the Riga meeting next week are rather low if the country will not meet the requirements - that us, deliver the list of reforms - before April 24. Before that the German magazine 'Die Zelt' speculated about the possibility of providing liquidity to Greece by ECB if this country doesn't pay its debtors.

After significant strengthening during the Tuesday session, the euro was very volatile and eventually went up after weak reports from the US were published. The recent events raise the probability of more clear rebound of EUR/USD.

Chances for zloty gains

The inflation in march was lower than expected. Earlier the prices of the goods and consumption services fell by 1.5 per cent (anticipated 1.3 per cent). A month before that the pace of the prices falls was 1.6 per cent.

As anticipated, The Monetary Policy Council (RPP) maintained the interest rates. The base rate is 1.50, which is a historical low. The money cost was lowered for the last time in March, when the authority decided on cutting the debt cost by 50 base points.

During the press conference after the MPC meeting, the president of the National Polish Bank (NBP), Marek Belka said that the rate of the domestic currency poses no threat for growth of the economy, export or inflation. By stating this the NBP chief confirmed the monetary authority's high tolerance for the appreciation of the Polish currency.

However, today's session wasn't the best one for the zloty - the Polish currency weakened against the most important pairs. Regardless, in long-term perspective PLN can increase gains. Today's conference of the president Belka sent a clear signal that the strong zloty doesn't bother the monetary authority, what - in addition to the high appetite for risk on the market - allows the Polish currency for further strengthening.

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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