Afternoon analysis 23.09.2015

, author:

Piotr Lonczak

ECB President Mario Draghi supported the euro, as he did not give a dovish scenario for the common currency. The zloty was steady.

European Central Bank President Mario Draghi increased the market volatility. The common currency gained against the dollar in spite of a balanced speech. It was due to the fact that investors had expected a more dovish stance of the ECB Chief.

On the one hand, the ECB President said that the September forecasts have shown a deterioration in the economic landscape and the inflation outlook. As a result, the inflation rate returning to the central bank's target (near 2 percent) will last longer than it had previously been thought. Factors responsible for the situation are a slowdown in emerging markets, a strong euro and drop in oil and other commodity prices.

Draghi said that the ECB is ready to adjust its bond buying program, if it is necessary. It was a dovish statement, that should have helped the euro.

On the other side, Mario Draghi said, it is too soon to assess whether current risk factors in the emerging markets are transitory or permanent. As a result, more time is needed to assess the current developments. Similarly, the market volatility and drop in commodity prices also need to be scrutinized.

The Draghi's stance was similar to comments from other ECB members. Recently, Peter Praet and Benoit Coeure have presented a similar view. However, Ewald Nowotny has been more restrained.

As a result, the euro gained against the dollar and other major currencies. The US PMI was not important today. The gauge stood at 53 points. It was little below the forecast.

Currently, the market attention shifts to Thursday's speech from the Fed President Janet Yellen. The market consensus is that rates will be increased in December. If the Fed Chair alters this view, the market volatility will increase.

Zloty steady against the dollar

Today the risk aversion was lower than yesterday. Investors were calmer due to quite good reports from the eurozone. The PMI indexes were quite good in spite of the Chinese crisis. However, the reports from China were very weak. This factor did not affect the markets.

Readings from Poland were in line with the forecast. The unemployment rate stood at 10 percent in August against 10.1 percent in the prior month. This factor did not support the zloty, as the Polish currency is under the influence of the broad market sentiment.

The zloty was stable against the dollar and increased against the pound. The Polish currency dropped against the euro as the common currency was strong in the second part of the session. Currently, there is little chance the zloty 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 Sp. z o.o is prohibited.

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