Daily analisys 08.05.2015

, author:

Piotr Lonczak

The pound has been strongly enforced thanks to the success of the Conservative Party. The investors are waiting for crucial data from the American labour market. The zloty is under influence of aversion towards risk.

The elections in the United Kingdom finished with the success of the Conservative Party. According to the BBC prognoses, they have received 329 mandates in the government. If this result is confirmed by the official estimations, David Cameron's party will be forced to create a coalition with somebody else. Another interesting thing, is the very low result of anti-European UKIP.

Such a settlement is quite a surprise. It's because before the elections, the surveys did not show a clear favourite, and indicated a hesitation among the voters. There were even anxieties that worse case scenarios such as the Scottish independence and the UK exiting the European Union will return.

The election results are giving a chance for a relative stabilisation. Additionally, they are advantageous for the economy. The Conservative Party is traditionally for decreasing the social expenses and is willing to reduce the tax burdens for the employees and the business.

There is still the problematic matter of referendum concerning the United Kingdom's membership in the EU. David Cameron has promised to conduct it, if he wins the elections. However, this factor is being ignored, and as a result the pound gains on value in relation to the most important currency pairs.

On a wave of optimism related to the elections' results, the rate of GBP/USD has increased to approximately 1.55. It is the highest level since the end of February. The British currency has strongly gained in relation to the zloty. During yesterday's session the rate of GBP/PLN jumped up to almost 5.59 PLN, from the barely 5.40 PLN.

Awaiting the data

The second part of the session will be dominated by the data from the American labour market. According to expectations, the Labour Department will inform that the employment in the non-agricultural sector will increase by over 220 thousand. The unemployment rate is expected to slightly drop to 5.4 percent, from the 5.5 percent in the previous month.

In context of the recent weak reports concerning the American economy April's reports have a very big significance. Just this week the disappointing data were the trade deficit, employment in the private sector (the ADP report), and the planned amount of dismissals (the Challenger report). The data about orders in industry and business cycle in services have also created mixed sentiments.

The quite good result of yesterday's report about the newly unemployed has very little implication in this context. It showed that the number of applications for unemployment benefits is still on the lowest level in fifteen years.

If today's data will not shatter the anxieties about the condition of the American economy, the expectations for the first increases of interest rates will be postponed to later in 2015. The Federal Reserve has signalized that it is ready for such a solution. Also, in case of results of, which are not too positive results of the economy it will tighten the monetary policy a slow tempo.

Such a solution will be disadvantageous for the dollar, which will probably increase the drops. At the same time, it is good news for hazardous assets, like e.g. the zloty. It's because the Federal Reserve will continue to deliver cheap money on the market for a longer time.

The zloty wears off

The last few days were unsuccessful for the zloty. The Polish currency was overvalued in relation to all important currency pairs. The strong franc is in the centre of attention. It came back above 3.90 PLN, and there were moments, when it reached above the level of 3.95 PLN.

Intensification of aversion towards hazardous assets is bringing harm to the Polish currency. It is a result of uncertainty concerning the future of Greece. They still have not made an agreement with their creditors, before the Eurogroup summit on May 11th. In this context, the payment for the International Monetary Fund the next day is still uncertain. It is because the level of means which Athens has is still unknown. At the same time, the sentiment towards the emerging markets is spoiled by the data from China. The trade in that country is not recording the best results.

Comments of the Federal Reserve chairwoman Janet Yellen, were also bad for the zloty and the Polish bonds. She said, that she sees a danger of high prices for shares and bonds, and expects a negative reaction of the investors for the first interest rates increases in the United States. After the culmination of nervousness on Thursday's session, the profitability of the Polish bonds is decreasing today.

However, the risk factors are temporary. If the sentiment towards hazardous assets will improve, the Polish currency should go back to growths.

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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