Daily analysis 15.04.2015

, author:

Marcin Lipka

Slightly weaker data from the States, and IMF prognoses' review, have caused a clear reshuffle on the currency market. EBC summit and production from USA, are the elements which increase variability on today's session. Neutrality of MPC in context of zloty's enforcement in relation to euro, can cause further appreciation of the national currency.

Most important macro data (CET). Estimations of macro data are based on Bloomberg's information, unless marked otherwise.

  • Between 12.00 CET, and 14.00 CET: The decision about interest rates in Poland (estimations without changes, on the level of 1.5%).
  • 13.45 CET: The decision about EBC interest rates (estimations: none of the elements of monetary policy should be changed).
  • 14.30 CET: Press conference of EBC chairman, Mario Draghi.
  • 15.15 CET: Industrial production from USA (estimations for March: minus 0.3% m/m).
  • 16.00 CET: Press conference of Marek Belka after MPC summit.

Data from USA and IMF projections made a disturbance

During last afternoon EUR/USD increased by 150 pips. The first catalyst of the main currency pair's appreciation, were again the weaker data about retail sales from the USA. The economists expected an increase by 1.1% m/m, whilst the actual reading was on the level of +0.9 m/m. As a result, in a year on year relation, due to quite a high base, the index dropped again and amounted only 1.3% y/y. It was the worst reading since 2009. On the other hand, the widely observed publication with the exclusion of fuel and cars, was on the level of +0.4% (consensus +0.5% m/m). Additionally, the data for the previous month were reviewed downwards.

As a result, more data (this time without the weather factors) have surprised negatively again. Thus, it takes the Fed further from raising interest rates in June, and strengthens the consensus of tightening the monetary policy in September, or even slightly later. This makes it a fundamentally disadvantageous factor for the dollar.

Half of hour after publishing the data from USA, there appeared new macroeconomic projections from IMF. They rarely cause clear reshuffles on the market, because the reviews are not to clear during 3 months. This time however, there were a few factors, because of which the GDP projection for United States has been decreased by half of percent for 2015 (down to 3.1%), and in Euro Zone it has been reviewed upwards by 0.3 percent (up to 1.5%). The area of common currency is clearly getting help from lower prices of raw materials, and euro's wear off. In USA on the other hand, a stronger dollar and weaker first quarter, decrease the annual result.

In the long term, it is worth remembering, that IMF has raised the surplus on the eurozone's current account (up to approximately 400 billion EUR). In the USA on the other hand, a deficit of a similar amount will be maintained. This just under a trillion USD of difference, can be at some point one of the main factors, which will change the trend on EUR/USD. Currently, however, the difference between the monetary policies, and still relatively fast tempo of GDP increase on the other side of the ocean, are certainly stronger arguments.

Draghi and production

In the last week, we have already mentioned, that the press conference of EBC chairman, will probably not bring any fundamental changes. However, it is worth to keep in mind, what kind of sentiment will be on the market in the afternoon. Relatively high levels of EUR/USD (above 1.0650) can cause an extension of the correction bounce of the main currency pair, even though Draghi was expected to be satisfied by the results of QE.

The market should also once again pay relatively more attention to the data from the USA. The industrial production in recent months, just as retail sales, were not amazing. Additionally, there is quite a strong discrepancy  in economists' indications for March (from minus 0.9% m/m to +0.3% m/m, median +0.3%), thus there is a relatively big chance for more sudden movements.

It is also worth noticing, that a weaker reading should “guarantee” a wear off of the USD. Combined with low “payrolls”, and unsatisfactory bounce of retail sale, a discussion about a longer maintenance of interest rates in the USA on a zero level, would begin once again.

Few words about the foreign market

Yesterday's data from the USA, and projections from IMF, have violated the consensus of a strong dollar. If today's data about industrial production from the other side of the ocean  disappoint again, and the optimism of Mario Draghi's message will not be connected with suggestions of hypothetical extension of QE, the increase movement on the main currency pair can be extended, and this week will end even above 1.0700.

MPC view on zloty

Everything indicates, that chairman Belka and his associates, will withhold from the direct comments about the zloty's enforcement in relation to the euro. We should also not hear any statements about the possible increase of money rates. There is a wide consensus in the Council, about leaving the value of the currency unchanged, until the end of this year.

The projections from IMF concerning the economic growth, should also influence the positive look on the zloty. The economic growth in Poland for the year 2015, has been reviewed upwards (up to 3.5%), whilst e.g. in Russia or in Hungary, the Fund has decreased the perspective of GDP.

As a result, we sustain our prognoses, that EUR/PLN should go down to the range of 3.85-3.80 in the second quarter. Additionally, if MPC approaches the PLN rate neutrally, and there is not any dramatic information from Greece by the end of the week, we can expect, that Friday’s session will finish below 4.00.

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

Range EUR/USD 1.0550-1.0650 1.0450-1.0550 1.0650-1.0750
Range EUR/PLN 4.0000-4.0400 4.0000-4.0400 4.0000-4.0400
Range USD/PLN 3.7700-3.8100 3.8100-3.8500 3.7300-3.7700
Range CHF/PLN 3.8400-3.8800 3.8400-3.8800 3.8400-3.8800

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

Range GBP/USD 1.4650-1.4750 1.4550-1.4650 1.4750-1.4850
Range GBP/PLN 5.5000-5.5400 5.4800-5.5200 5.5200-5.5600

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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