Daily analysis 14.08.2013

, author:

Marcin Lipka

The morning GDP data from Germany and France exceeded economists' expectations. Can a discussion on US budget extend the QE? Lockhart slightly more dovish than in last week remarks. Bloomberg survey on tapering. Poland should also report a fairly solid data.

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

  • 10.00 CET: preliminary GDP reading from Poland (survey +0.7% y/y)
  • 11.00 CET: preliminary GDP reading form the euro area (survey +0.2% q/q)
  • 21.15 CET: Fed's member James Bullard is scheduled to speak

Positive from Europe. Never ending QE tapering story

During the European morning the GDP data hit the wires. Both France and Germany expanded more than anticipated. Paris reported growth at 0.5% q/q (survey 0.2% q/q) and Berlin announced a gain of 0.9% q/q seasonally adjusted (survey 0.7% q/q). The readings were quite solid especially when we compare them to the previous data. Similarly the GDP from the euro area should also top the estimates. A quick question comes to my mind: How the ECB policy is going to be shaped. Recently Mario Draghi has repeated that the interest rates will remain unchanged or will be lowered (including the deposit) for an extended period of time. However, if the economy start growing then it is a slim chance to cut the benchmark. It can be used in the future to support the euro (build “a story”).

It is worth to note yesterday's Dennis Lockhart speech. The Fed's member (non voting, dovish, seen as a close to the Federal Reserve consensus) said during the conference that “A decision to proceed – whether it is in September, October, or December – ought to be thought of as a cautious first step”. Lockhart also told reporters that “Very weak employment numbers would be one” reason to avert the tapering along with “a sudden pickup in disinflation indicators”.

Regarding widening-down the QE, Bloomberg reported a survey asking economist on the tapering. 65% expect that Fed will scale-back the asset purchase in September. What is more interesting, however, the first step is going to be quite small (only $10 billion whereas previous it was $20 billion). It is also in line with Lockhart suggestions of “cautious steps”. If it turns out to be true it should be dollar bearish. So currently we have two scenarios which should push the dollar lower (no tapering next month and a small one) and one bullish (20 billion in September).

Another scenario regarding the QE was presented in the Financial Times “Fiscal divisions on Capitol hill prompt Fed tapering concerns”. The “FT” claims citing economists that there is a chance [slim] that some disagreements on the budget between Democrats and Republicans “could limit the Federal Reserve drive toward slowing asset purchases”. Ethan Harris, a senior global economist at Bank of America Merrill Lynch told the “FT” that fiscal environment was “one of the reasons” he was betting on a December tapering despite the chance for a real “disruption” is only 20 percent.

Summarizing, the morning data hasn't strengthen the European currency and it has been traded around 1.3260 to the dollar. The overall data form the euro area should beat the expectations, but it is probably already priced in. A kind of hope EUR/USD bulls can have from James Bullard speech. However, if the most traded currency pair does not come back over 1.3300 till the end of the day then the slide under 1.3200 will be quite possible.

The zloty around 4.20

In the recent hours we had quite interesting story on the zloty. Tuesday's slide of the EUR/USD didn't push the EUR/PLN over 4.20. On the other hand today, despite strong Eurozone readings, positive opening in Europe and expect solid GDP reading we are slightly waker on the Polish currency. If we stay under 4.22 I would not be concerned too much but if we close over this level the zloty slide can be extended much further.

The GDP growth should exceeded the Bloomberg expectations (0.7% y/y). The Ministry of Economy estimates that Polish economy rose 0.8%, but the actual reading can be even better taking into the account recent trade reports (positive contribution to the GDP).

Summarizing, at the end of the day we should return under 4.20 on the EUR/PLN. Only the rise over 4.22 can be a warning sign for the zloty bulls.

Expected levels of PLN according to the EUR/USD rate

EUR/USD 1.3250-1.3350 1.3350-1.3450 1.3150-1.3250
Kurs EUR/PLN 4.1800-4.2200 4.1700-4.2100 4.2000-4.2400
Kurs USD/PLN 3.1200-3.1600 3.0900-3.1200 3.1600-3.2000
Kurs CHF/PLN 3.3800-3.4200 3.3800-3.4200 3.4000-3.4400

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

Kurs GBP/USD 1.5350-1.5450 1.5450-1.5550 1.5250-1.5350
Kurs GBP/PLN 4.8500-4.8900 4.8700-4.9100 4.8300-4.8700

Overall technical situation on the analyzed pairs

The EUR/USD is still bullish. All Polish pairs are in bearish trends.

Technical analysis EUR/USD: the EUR/USD failed to move over 1.34 level. Currently we bounced back from the resistance, but the shorts will be preferred when we slide under 1.32 mark.


Technical analysis EUR/PLN: the EUR/PLN slided under 4.20 level which supported the bearish trend. The next target is around 4.10-4.13. Alternative scenario is a buy signal when it rises over 4.26.


Technical analysis USD/PLN:we slided under 3.15 on the USD/PLN what suggests that the next target is around 3.05. Alternative scenario is a buy signal when the pair rises over 3.22.


Technical analysis CHF/PLN: the first target was reached at 3.42. The strong support is around 3.40. If it falls under 3.40 the next target is around 3.33. Alternatively a rise over 3.48 is a buy signal.


Technical analysis GBP/PLN: the sell signal was generated after sliding under 4.97 with a target around 4.9 (already reached) and in extension even toward 4.8. Alternatively a rise over 5.00 is an indication of bulls' return.


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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