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Afternoon analysis 15.12.2015

, author:

Marcin Lipka

The EUR/USD depreciates due to good sentiments on a wide market. No changes in the American inflation in November. The zloty is stronger to the euro despite the lower inflation prognoses.

A positive sentiment on the financial markets enforced in the second part of the session. Strong increases are seen on the European stock markets. Contracts for the American indexes are also growing. As a result there was a decrease in the EUR/USD rate. It is because the main currency pair loses, when the atmosphere on the market is positive.

Today's data from the United States was neutral for the currency market. Consumers' inflation in November did not change to the past month, and was plus 0.2%. After excluding variables of prices of energy and food, the base case inflation slightly grew – from 1.9% to 2%. Data regarding business cycle in New York's region, were also not of a greater significance. The New York Empire State index increased from the level of minus 10.7 to minus 4.6%. This result was also coherent with expectations.

On Wednesday, the Federal Open Market Committee will raise interest rates by 25 base case points. Likelihood of such scenario is 76% (Bloomberg data). The announcement regarding the path of hikes will be of a great significance. If the Fed indicates three hikes for the next year, this may have a neutral or positive impact on the markets.

Zloty grows to euro

Inflation in Poland appeared to be stronger than the prognoses. Pace of an increase in prices depreciated to minus 0.6%, against the prognosis of minus 0.5%. The month before, the prices depreciated by 0.7% in relation to the past year. Data did not have a significant impact on the zloty's behaviour. Nevertheless, a further decrease in inflation in a longer perspective, may increase a pressure on the Monetary Policy Council to decrease interest rates. These actions may be considered next year, when the MPC personnel changes.

In the beginning of next year, the personnel of the Monetary Policy Council will start to change. A change on the position of the president of the National Bank of Poland will be the most important event. President Belka will end his term of office in mid 2016. Because of this, the Monetary Policy Council summarized its five-year-long activity today.

In years 2010-2015 the Polish monetary authorities had to face two global phenomenons, which were of a great significance for the Polish economy. The first one were significant changes in changes of raw materials, which eventually lead to deflation. The second one was a constantly lower pace of an increase in the GDP, and an expansive policy of the greatest central banks. Consequence of this situation was an inflow of capital to the emerging markets. The passing MPC estimates the condition of the Polish economy to be good and stable.

During today's press conference president Marek Belka referred to the budget plan for 2016, and claimed that the prognosis of the GDP increase on the level of 3.8% is ambitious. However, it can be performed due to a positive impact of an increase in social expenses. The NBP predicts the GDP on a level of 3.5%. In reference to the inflation prognosis on a level of 1.7%, Marek Belka estimated that reaching such pace of an increase is not realistic. However, deficit is of the biggest significance, and the plan of keeping it on the level of 2.8% was positively estimated by the NBP chairman.

The NBP chairman also thinks that a decrease in interest rates would not have to decrease the rates of loans. Marek Belka claims that the previous actions of the monetary authorities lead to a clear decrease in the rates of loans. In his opinion, profitability of bonds is dependant on the global factors, and new cuttings of rates would not improve this element.

Marek Belka said that he is not afraid of a negative impact of the tightened American monetary policy on Poland. In the past years the zloty was volatile, but it also showed quite a resistance to the global factors.

On Tuesday, the zloty was under a positive influence of the wide market factors. If this tendency is kept after tomorrow's announcement of the Fed, the probability of a short-term enforcement of the Polish currency will increase.


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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