Daily analysis 07.02.2014

, author:

Marcin Lipka

Lack of decision about soothing monetary policy in Euro Zone, causes enforcing of common currency and approaching of EUR/USD to boarders of 1.3600 level. Data from American labour market are today in the centre of attention. Further problems of Ukraine. Polish zloty tries to come back below the level of 4.18 per euro.

Macro data (CET- Central European Time). Survey is supplied by Bloomberg unless otherwise noted.

  • 14.30 CET: Data from American labour market. Most important reading is payrolls, which is new vacancies in outside agriculture sector. Bloomberg's estimations median is 181 thousands (though one should notice a significant prognoses' divergence – between 125 thousands and 270 thousands). Reuters' estimations are also 181 thousands. On the other hand according to surveys made by Dow Jones Newswires, American economy generated 189 thousands of new vacancies in January.
  • 14.30 CET: Mario Draghi's press conference after ECB summit.
  • Between 12.00 CET and 14.00 CET: MPC decision about money rates.
  • 14.30 CET: Weekly applications for unemployment benefits in USA (estimations: 337 thousands).
  • 14.30 CET: Foreign trade balance in USA, data for December (estimations: minus 36 billions USD).

ECB. NFP and Ukraine

Thursday's highlight was of course ECB decision about money rates and later Mario Draghi's press conference. According to economists' expectations, the value of money in Euro Zone remained on the same level. After announcing this decision, we had a slight growth of variety on EUR/USD, but most of the market participants knew, that the crucial moment will be ECB president's press conference which started 45 minutes later and Bank's announcement. When it appeared that Draghi and his collaborators did not start any non-standard elements of monetary policy, EUR/USD increased to highest levels since the end of January. Apart from copied from month to month informations that inflation in Euro Zone will remain below aim for longer time, economic growth will remain on low level and probabilities for CPI, as well as for GDP, are moved more in the direction of lower than higher readings, it is worthy to pay attention to quite clear instructions about circumstances in which we can expect smoothing the monetary policy, passed by the president. Most important element is the ECB macroeconomic projection held in March. I will include most of all first estimations of GDP growth and inflation for year 2016. Another matter brought up by Draghi (in his announcement as well as answering the questions) is the tension on Emerging Markets (which “pleased” the EM currencies; Fed ignored the problems of developing countries during its summit at the end of January). Draghi though did not say, how should ECB respond to EM problems. But bringing up the subject itself (also at upcoming G20 forum), clearly helped the risk sensitive assets. Last element was bringing up next week's reading of Euro Zone's GDP/ President's mentioning of one “figure” will cause that the market will surely prepare itself well for this reading, if it may have a significant input for the decision of future monetary policy. The question about possibility of resignation from sterilizing the purchase of obligations programme in frame of SMP operation (I wrote more about it in yesterday's comment) was also supportive for euro. Draghi confirmed that it is “one of many possible elements”, but later added, that it was not discussed on Thursday's meeting. Market interpreted this statement as decreasing the probability of introducing it in the future.

Today's investors' behaviour will be dominated by data from American labour market. It happens usually in the first Friday of the month. After surprisingly weak payrolls from December (only 74 thousands, which is 100 thousands less than the economists' expected), afternoon's data will be observed more carefully. Estimations of main information agencies (Bloomberg, Reuters or Dow Jones Newswires) are shaping in boarders of 180-190 thousands and it will be the main point of reference for the market. Traditionally the worse the readings (at least by 20 thousands), the bigger chance and scale of dollar's reduction of price. On the other hand, a publication above prognoses (at least over 20 thousands) is an occasion for “buck's” value growth. Apart from “headline” reading it is worthy to remember about data revision (from previous two months). Also, as Eric Morath wrote in today's “The Wall Street Journal”, data from January will also include 2013 reports' update. Morath underlines, that in 2012 revision was +30 thousands vacancies per month. Informations about unemployment rate will be also an interesting element. The lower its level, the bigger chance for forward guidance modification.

The situation on Ukraine is anxious all the time. Bloomberg informs, that the central bank of our eastern neighbour has officially devalued hryvnia's value, used to accounting purposes (from the level of 7.99 per dollar to 8.7; market rates are 8.85). Also controls of capital flow were introduced. They are based on at least “six day waiting period for purchasing foreign currencies by companies”. Financial tensions are direct derivative of stopping Russia's help for Ukraine (from the package worthy of 15 billions only 3 were sent at this moment, and another instalment is on hold). Economist of London's RBS, Tatiana Orlova, quoted by Bloomberg, wrote that “political impasse and holding another part of financial help from Russia increases the risk of Ukraine's bankruptcy in this year”.

EUR/USD market after yesterday's taking off in areas of 1.3600, clearly wants to attack the higher levels. To do it, it needs worse data from American labour market (at lest 20 thousands and lack of upward revision from previous months). On the other hand, in case of good payrolls, dollar can quickly enforce, and then it is not impossible that EUR/USD will fall below yesterday's minimums (1.3480).

Strong PLN

After some hesitations during announcing the ECB decision (theoretically the lower money rates in Euro Zone, the bigger attractiveness of national currency for wallet investors), zloty chose the option of enforcing (argument of aversion's decrease to risk, appeared to be stronger than the perspective of bigger money rates' difference). Thanks to this we are beginning to come back to well known division of hesitations (4.14-4.18 per euro). Optimum scenario for zloty's bulls were slightly worse than expected data from American labour market. They would hold the chances for longer conducting of ultra ease monetary policy by Fed, and at the same time they would not be a threat for economic growth on the other side of the ocean (which means that positive sentiment should dominate).

Base scenario for zloty is to remain below the level of 4.20 per euro. If the data from USA will not be much different from the prognoses, variety on national currency will be limited and short termed.

Expected levels of PLN according to the EUR/USD rate:

Range EUR/USD 1.3550-1.3650 1.3650-1.3750 1.3450-1.3550
Range EUR/PLN 4.1800-4.2200 4.1800-4.2200 4.1800-4.2200
Range USD/PLN 3.0700-3.1100 3.0500-3.0900 3.1000-3.1400
Range CHF/PLN 3.4200-3.4600 3.4200-3.4600 3.4200-3.4600

Expected GBP/PLN levels according to the GBP/PLN rate:

Range GBP/USD 1.6350-1.6450 1.6450-1.6550 1.6250-1.6350
Range GBP/PLN 5.0700-5.1100 5.0900-5.1300 5.0500-5.0900

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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