Daily analysis 17.04.2015

, author:

Marcin Lipka

The Fed members have commented on the most recent macro publications and are expected to move the interest rate hike to September. Turmoil in Greece continues. The zloty remains stable to the euro, but its weakness toward the franc is a threat. Important readings on Monday.

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

  • 14.30 CET: Inflation in the US (survey: +0.3% m/m and 0.0% y/y).
  • 16.00 CET: University of Michigan consumer confidence index (survey: 94 points). The Fed revises interest rate hike

The Fed revises interest rate hike moment

The economy is too weak to raise the rates. This is a crucial outcome from the recent Fed members' comments. It means that the base moment for the hike has moved to September. However, in case the data fails to improve, the expectations might be pushed even to December.

Regarding the monetary policy, the most important comments came from Dennis Lockhart and Stanley Fischer. The Atlanta Fed President claims that the recent data are not ideal for making the crucial monetary decision. Also the “FT” interview with Lockhart is worth mentioning. It was recorded on April 13th, but published yesterday.

Even before the weak data hit the wire this week, Lockhart was leaning to the September data. Now, this view should be at least confirmed or even strengthened. Furthermore, the vice chairman of the Federal Reserve focused more on inflation, saying that earlier he had expected prices to top the central bank’s goal in 2016 but now, due to the low commodity prices and the stronger dollar, this date is moving further away.

Political Greece

The plethora of voices regarding Greece is ballooning and as a result the subject is having smaller impact on the market. Additionally, the issue is getting more political than financial. The case is similar both from Greece and the EU’s point of view.

It is also worth remembering that on April 24th is not very distant. Moreover, Greek payments to the IMF are also quite close (the main is on May 12th). Despite the fact that we still assume the agreement is much more probable than an uncontrolled eurozone exit, the Athens subject is prone to scare the market in the forthcoming days.

The foreign market in a few sentences

Currently, we should expect that the base moment for the interest rate hike in the US should be September. Additionally, the tightening may be even later if the macro data fails to meet expectations. As a result, each reading from the US would be scrutinized including today's inflation and consumer confidence publications. Traditionally, weaker data is negative for the greenback.

Stable on the zloty, but franc is edging higher

The zloty has been moving close to the 4.02-4.03 level per euro. The PLN still “feels” the weaker forint from the mid-week slump. In the following days, however, this issue should fade and the market is expected to focus on local readings and global sentiment.

More attention should also be put on Monday's production and retail sales readings from Poland. The data close to the consensus should keep the zloty strong and give an opportunity to test the 4.00 level again.

Regarding the franc the situation looks more complicated. The Swiss currency fails to weaken toward the euro and the EUR/CHF pair is eager to test the 1.00 level. As a result, the CHF/PLN may slowly approach the 4.00 level even if the zloty to euro stays close to the current levels.

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

Range EUR/USD 1.0650-1.0750 1.0550-1.0650 1.0750-1.0850
Range EUR/PLN 4.0000-4.0400 4.0000-4.0400 4.0000-4.0400
Range USD/PLN 3.7400-3.7800 3.7800-3.8200 3.7000-3.7400
Range CHF/PLN 3.8700-3.9100 3.8700-3.9100 3.8700-3.9100

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

Range GBP/USD 1.4950-1.5050 1.4850-1.4950 1.5050-1.5150
Range GBP/PLN 5.6000-5.6400 5.5800-5.6200 5.6200-5.6600

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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