Daily analysis 13.11.2015

, author:

Marcin Lipka

Currencies from the emerging markets are under depreciation pressure. The FOMC members confirm that the hikes will be performed in December. The zloty increases its overvalue, despite the fact that the GDP data was better than expected.

In October's announcement, after the Federal Open Market Committee meeting, the American authorities directly indicated December as the moment of the possible increase in interest rates. Since then, this scenario was basically supported by the representatives of the FOMC.

It was the same on Thursday, which brought about a series of testimonies from the Federal Reserve representatives. Their statements strengthened the opinion that interest rates will be raised at the FOMC meeting in December.

In yesterday's statements the Fed representatives emphasized the path of hikes. This was another attempt to move the financial market's attention from the moment of monetary policy tightening, to the pace in the following quarters. Such actions are set on decreasing possible tensions coming from the first increase in the cost of credit for almost a decade.

At this point, the most precise view was presented by Charles Evans, the chairman of the Fed department in Chicago. He claims that at the end of 2016 the level of interest rates should not be higher than 1%. This leaves space for only three increases next year. That is of course, if the FOMC begins this during December's meeting. Evans also thinks that the path of hikes is more significant than the moment of initiation.

Such a scenario would temporarily wear off the dollar. On the other hand, a testimony from the EBC chairman Mario Draghi did not manage to do clear harm to the euro, even though it was clearly dovish. In these circumstances the EUR/USD pair took a rebound from the lowest level since April. However, this movement decreased to a certain degree during today's session.

The GDP did not help

The Central Statistical Office informed that in the third quarter the Polish economy increased by 3.4% in year on year relation. This result was better than the market's expectations, which were assuming a growth at a pace of 3.3%. In the previous quarter the Polish economy increased at a pace of 3.3%.

This means that we are unexpectedly dealing with the acceleration of growth. However, we need to wait for more details until November 30th. This is when the GUS will present an initial report which includes information regarding the structure of growth. Currently, it is only in the sphere of assumptions that an increase in the GDP was supported by good results from foreign trade and a strong labour market could cause an increase in consumption.

Janusz Witkowski from the GUS estimated that on the whole the 2015 pace of the GDP growth will not be lower than the 3.3% achieved last year. Prognosis of the National Bank of Poland speaks about an increase at a level of 3.4%, and the European Commission expects it to be 3.5%.

However, the zloty did not take advantage of the better data. The Polish currency is under the influence of negative sentiment, which touches the majority of currencies of the emerging markets. It is a result of the expected monetary tightening in the USA, and uncertainty regarding the future decisions of the European Central Bank. Additionally, the sentiment on the wide market is clearly negative.

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.

Return to the main list

See also: