Daily analysis 15.09.2015

, author:

Marcin Lipka

The BoJ meeting and “minutes” from Australia in the context of Fed's interest rate decision on Thursday. Today's readings are important but should not change the base case scenario. The zloty remains stable to foreign currencies.

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

  • 14.00: Inflation from Poland (minus 0.4% m/m and minus 0.7% y/y)
  • 14.30: Empire State – New York Fed leading manufactring index (survey minus 0.5 points)
  • 14.30: Retail sales from the US (survey: +0.3% m/m, excluding gasoline and cars)
  • 15.15: Industrial production from the US (survey: minus 0.2% m/m)

Hints regarding the Fed's decision

Last Friday we presented several statements from different central banks in search of hints regarding Fed's decision in September. The attempt wasn't that successful especially that there was observed a strong division between the ECB and the BoE. Overall the signals were not clear and the approach from different policy makers was strongly related to their economies and dependency on EM demand.

However, it is possible that more conclusions can be drawn from Bank of Japan (BoJ) statement and Reserve Bank of Australia (RBA) “minutes”. Especially the RBA publication can be helpful because it deals with many market issues including China.

The “minutes” concluded on September 1st shows that MPC from Sydney sees People's Bank of China (PboC) decision to devalue currency as an element of bringing the renminbi closer to market forces. It can be regarded as a positive information because more competitive devaluation could bring higher volatility in Asia.

On the other hand the RBA noted that the PBOC was selling currency reserves to halt the depreciation of renminbi caused by significant capital outflow. The Australian MPC also pointed out that Beijing cut the reserve ratio requirements and interest rates to “counter the liquidity drain from sales of foreign exchange reserves”.

The RBA claimed that Chinese growth “had continued to ease” and the there was a “downside risk to the overall outlook for growth in China over the coming year”.

The monetary committee from Australia also discussed the Fed's decision. The RBA writes that “the recent volatility in global financial markets has led to market expectations of an increase in the federal funds rate receding substantially, with only one-in-three chance of an increase at the September meeting” Further the MPC said that “it was possible that the first increase in the fed funds rate in around nine years could have significant effect on financial markets despite the fact that it had been well telegraphed”.

Much less important news regarding the Fed came from MPC meeting in Tokyo. Only a sentence concerning EM economies exporting commodities were mentioned in connection with the recent market turmoil. China was omitted in the BoJ statement.

The foreign market in a few sentences

Despite the fact that retail sales and industrial production form the US are scheduled to be published today it is a slim chance that it can impact on the Fed's decision. The data will have to significantly deviate from the consensus to bring a market reaction and push the EUR/USD from the 1.13 range before Thursday's Fed's meeting.

The zloty remains stable

Both the forint and the zloty remain fairly stable and are even biased toward slight appreciation. Regarding the Polish currency there is a slim chance that the EUR/PLN drops significantly below 4.20 before Fed's meeting. Such scenario is only possible with strong equity gains and some euro weakness on the risk appetite appreciation.

A slight impact on the Polish zloty trading will have inflation publication. Even if deflation turns out to be deeper than expected there is a slim probability that the zloty can experience a stronger moves especially that the recent current account were ignored. It shows that the market is fully focused on the global events.

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

Range EUR/USD 1.1150-1.1250 1.1250-1.1350 1.1050-1.1150
Range EUR/PLN 4.1900-4.2300 4.2000-4.2400 4.1800-4.2200
Range USD/PLN 3.7200-3.7600 3.7000-3.7400 3.7500-3.7900
Range CHF/PLN 3.8000-3.8400 3.8000-3.8400 3.8000-3.8400

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

Range GBP/USD 1.5350-1.5450 1.5250-1.5350 1.5450-1.5550
Range GBP/PLN 5.7200-5.7600 5.7000-5.7400 5.7400-5.7800

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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