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Daily analysis 11.08.2014

, author:

Marcin Lipka

EUR/USD maintains in the limits of 1.3400. Decrease of geopolitical tension causes increases on American stock market, which are strongest for few months. Turkish elections without any influence on the market. German economy has probably shrunk in the second quarter. Zloty returns below the limit of 4.20 per euro. This week will bring some important data.

No macro data which may significantly affect the analyzed currency pairs.

  • No macro data, that could significantly influence analysed currency pairs

Tension's decrease. Turkey. Europe

American indexes have finished the Friday's session with a solid growths that crossed one per cent. Direct reason of better market sentiments, was the improvement of geopolitical situation. Information about Russian armies finishing their training near the Ukrainian boarder, gave some investors a signal, that perhaps Kremlin tries to calm the tense situation down a bit. During the weekend a conversation between the Ukrainian president and United States Secretaty of State. Their subject were preparation of conditions for humanitarian mission addressed to the regions of Luhansk and Donetsk, that are cut off from electricity and supplies. Poroshenko will probably try to organize the mission under the auspices of International Red Cross. Such situation development could cause a certain stabilisation (at least temporary) in the region. Some signs of tension's decrease can also be observed in the Near East, where another 72-hour long ceasefire between Hamas and Israel has been established.

According to expectations Recep Ergdoan won the Turkish elections, by claiming over 50% of the votes. Prime minister who was at office for previous 12 years, will be the first president elected in common elections. Past several months were not easy for the Turkish currency. The country was first touched by the wave of protests in the capital city, and then by a serious corruption affair in the government and a clear pressure from the reigning authorities on central bank's actions. However currently the situation has stabilised, although lira is still under pressure, because of losing 10% in relation to euro during recent 12 months, while e.g. zloty at the same time has actually not changed. Further shape of Turkish currency will be dependant from geopolitical situation (as well as other emerging markets currencies) and from “Justice and Development” party's usage of full authority (further radicalization should wear off the national currency, and the return to neurtal policy should enforce it).

After solid readings of GDP from Spain (quarter-to-quarter +0.6%) and very weak result from Italy (minus 0.2 k/k), we will receive some data from France and Germany this week. According to Bloomberg's estimations French economy should develop by 0.1% k/k, and our western neighbours will probably record a slow down in limits of minus 0.1% k/k. We got used to weak quotations from France, but the decrease of GDP of “European Locomotive” will not be a very pleasant scenario. According to a lot of economists, deterioration of economic activity in the second quarter can partly be a result of quite a mild winter and a certain seasonal alteration (we wrote about it few weeks ago, how the weather accelerated Germany and slowed down USA). However, if we will observe Germany's deeper descend, and the further indexes readings will suggest a deteriorating business cycle, then the pressure on EBC to keep on soothing the monetary policy, should get bigger, what will inevitably gain weight on the common currency.

Hard data however did not allowed to generate working off on shares market in USA, and at night CET president Obama announced, that he begins air raids on Iraqi rebels' positions, what along with the tense political situation between Russia and West, again increased the risk aversion (despite that the main players' opinions about the Iraqi matter are rather coherent).

The main topic in media at the moment, are the Russian sanctions on European food. However it is worthy to present the facts in this matter, because recent hours have been a real flood of unverified informations. According to the information from European Commission quoted by Polish Press Agency, embargo will include the products with a total value of 5.25 billion euro, which is 46% of total EU food export to Russian Federation. Thus the influence on entrepreneurs trading these products (or e.g. the transport branch), will be very acute. However if we will go to the whole European Union's export to Russia, the numbers do not seem to be that much impressive.

In conclusion, EUR/USD should in certain degree take advantage from the improving geopolitical situation. Working off can be stronger at some moments, when the “short positions” will be closed. After eliminating the market factor, the negative attitude will however probably maintain and the return below recent minimums is a basis scenario in mid-term.

Below 4.20

As much as zloty was losing at the moment of global sentiment's deterioration and descends on American stock market, it is now working off the part of loses, along with increases on the packages on the other side of the ocean. We have returned under the limit of 4.20 per euro and we will probably maintain in this division (4.18-4.20) during the first part of the week. That is of course, if the geopolitical situation will not deteriorate drastically (escalation in the east) or clearly improve (international humanitarian mission in Ukraine).

It is also worthy to pay attention on the macro data from the country. On Wednesday we will have the inflation reading – first one for few months, when we will observe a minus CPI in r/r relation, and on Thursday GDP for the second quarter. The market expects that in the relation quarter-to-quarter, the growth was near the limits of zero, and in the relation year-to-year we will be slightly above 3.0. If the second figure would be below the round limit, we should observe a clearer (more than one groschen) wearing off of the national currency, because some of the MPC members have suggested, that in case of growth tempo's slow down below three per cent, the chances of money rates cutting will increase.

In conclusion, during upcoming hours we should maintain the gained levels and remain below 4.20 per euro. Also the CHF/PLN pair will probably not deflect noticeably from the limit of 3.45.

Expected divisions of zloty pairs according to rate of EUR/USD

Kurs EUR/USD 1.3350-1.3450 1.3250-1.3350 1.3450-1.3550
Kurs EUR/PLN 4.1800-4.2200 4.1200-4.2400 4.1600-4.2000
Kurs USD/PLN 3.1000-3.1400 3.1400-3.1800 3.0600-3.1000
Kurs CHF/PLN 3.4400-3.4800 3.4600-3.5000 3.4200-3.4600

Expected levels of GBP/PLN rate according to GBP/USD

Range GBP/USD 1.6750-1.6850 1.6850-1.6950 1.6950-1.7050
Kurs GBP/PLN 5.2500-5.2900 5.2700-5.3100 5,2900-5.3300

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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