Daily analysis 11.10.2013

, author:

Marcin Lipka

The dollar still at 1.35 against euro. The short-term compromise for the American trouble more and more real. The president of the Mortgage Bankers Association: Yellen candidacy is a good message. 100th day of Mark Carney as the Bank of England Governor marked by the increase of bond yields and the threat of the housing bubble. The zloty falls by 0.1% and ends its 3-months gain.

The most important makro data (CET- Central European Time). Survey is supplied by Bloomberg unless otherwise noted.

  • No key macroeconomic data today.

Readiness to talk. Yellen is a good message. FXCM, Inc. shopping continues

The American polititians have confirmed the readiness to work out a short-term raisng of the debt ceiling. Yesterday was the 10th day of the government shutdown and Barack Obama had the Republicans at the White House. That resulted in - as both parties say - a "useful" meeting. The date of October 17 is fast approaching and on that day, according to Treasury Department, the American government will run out of money to pay its liabilities. Despite the deadline, the only conclusion of the meeting was that the discussions will be continued. The Obama administration described the talks as "good", the Texas Republican Pete Sessions also seemed to maintain good moods. He said that "We're all working together now".

That optimistic belief resulted in maintaining the yesterday's dollar rate. EUR/USD holds steady at 1.35 and until the awaited decisions are made (especially long-awaited by the America's creditors), it is hard to expect a sudden change in that matter.

Thursday's nomination of Janet Yellen to Fed's chairman was described as a "good message" by David Stevens, the president of Mortgage Banks Association. Federal Reserves, now engaged in mortgage buying, are in the area of Stevens' interest. "I think for the mortgage markets and for the housing market, Janet is a positive message because it’s continuity" - Stevens said - " Not only does she have experience but she’s likely to continue the pace that at least Bernanke was on for the time being, making sure that the markets don’t stumble amidst all the shutdown news and deficit ceiling discussion". Expected support a part of the Republicans and all the Democrates for Yellen seems to be factual. Hence yesterday's prognosis about medium and long term downward pressure on the dollar is still to date.

A series of buyouts and overtakings by FXCM, INC. continues. The biggest online broker on the currency market has bough 50.1 percent stake in rival Faros Trading LLC and the American retail accounts, until recently property of Alpari U.S. LLC. Drew Niv, the chief executive in NXCM has commented in a telephone conversation: “In a world where regulation is very heavy, essentially scale is king. The guys with the biggest scale are going to win that race”.

Carney's 100 days. British interest rates are still at the record low

The pound has ended the weekly fall and is now against the dollar at 1.59. The British currency was only 0.1 percent away from the lowest rate against the euro since 5 weeks. The pound gaind against the dollar on a wave of optimism caused by the perspective of compromise in the American government. Estimated house rates in UK turned out to be a record high, what was supposed to be another signal for economy recovering. Meanwhile, over some parts of UK there is a threat of the housing bubble. The first part of its emerge already happened - the low debts cost and, in consequence, housing prices rising. The scenario of the bubble bursting is almost always the same - companies declaring bankrupcy, falling prices and lots of bad loans. The Bank of England seems to not acknowledge that and keeps the interest rates at the constant for 55 months and record low level of 0.5 percent. That along with the rising bold yields have "honoured" Mark Carney's 100 days as the governor of the Bank of England.

The zloty paring the 3-moths gain

The domestic currency slipped by 0.1% against the euro and gave an end to its gain of three months. The increase by 3% is, according to Bloomberg, best performance among currencies of emerging markets. The yields on ten year government bonds fell by 2 pips to a level of 4.43, however, a slight upward pressure to 4.58 is expected by the end of the year. In the meantime, the medican forecast of 28 Bloomberg economist sat that Polish current account deficit will increase from July's 178 million to 213 million in August.

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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