Daily analysis 19.05.2014

, author:

Marcin Lipka

Fairly calm on the EUR/USD. Mixed data from the US. Bloomberg survey before ECB meeting gives a base case scenario for the June's meeting. Bundesbank not so dovish. The Polish zloty remains around Friday's closing levels. Polish MPC member on the expected GDP growth in the following years.

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

  • No major economic data which may affect the analyzed pairs.

US Data. Bloomberg survey. Weidmann

Friday's data were mixed from the US economy and didn't spur any major moves on the currency market. The housing data was much better than estimated, but consumer sentiment reported by University of Michigan and Reuters dropped from near multi-year highs at 84.1 to 81 whereas economists estimated a rise to 84.5. Lack of reaction for any of the published readings may show that the EUR/USD can remain fairly stable till the next European Central Bank meeting.

The expectations before the June's ECB decision are nicely presented in the recent Bloomberg survey where 90% (47 out of 52) economists estimate that in two and a half week the Governing Council would decide to cut the benchmark to 0.1 percentage point. Additionally, 29 out of 47 market professionals claim that we can see a negative deposit rate after June's 5th. In a separate message Bloomberg (citing Der Spiegel publication) claims that ECB chief economist will be recommending a deposit rate cut to minus 0.1%.

From the ECB communicates we may also conclude that some kind of packaged measures are being prepared. However, regarding these issues there is no broad economists' consensus. Only 12% surveyed by Bloomberg expect that Mario Draghi announces a pause of the SMP sterilization program and 8% claims that we could see either LTRO extension or QE. In the survey there is no clear message regarding an initiative for small and medium companies to lower their financing costs. This, however, should not have a substantial effect on the common currency valuation. The mentioned survey we should treat as a good benchmark before the incoming ECB meeting. Any measures which are more accommodative should weaken the Euro and lack of expected actions (for example no negative rates) may push the European currency higher.

In the morning we had a couple of interesting comments from Jens Weidmann (related to the previous unofficial reports form “The Wall Street Journal” on more dovish Bundesbank stance; reports were not confirmed by both Reuters and Bloomberg”). He said that Euro strength may be related to the capital inflow to the Euro Zone, what does not have to be negative for the economy (puts a downward pressure on yields; gives a stimulus). Moreover, he “advised” that states, instead of complaining on too strong currency, should build competitiveness. From his comments it does not seem that either he or the Bundesbank is much closer to support the broad monetary stimulus than a few weeks ago.

Summarizing, it is worth to have in mind the Bloomberg survey as it can serve as a base case scenario for market expectations regarding the incoming ECB members comments and the central bank decision in early June. In the short term (following hours) the trade should be fairly calm – around 1.37 on the EUR/USD.


We began the Monday session in a well known territory – around 4.19 on the EUR/PLN. There are also hardly any changes on other pairs related to the PLN – Swiss franc, dollar or the pound. The consolidation should continue in the following hours due to lack of impulses coming from the broader market.

Concerning local monetary policy it is worth to cite professor Hausner comments. The MPC member (his views should be close to the governor Belka stance) claims (according to PAP) that both in 2014 and 2015 the Polish economy should expand at a rate of 4%. He also adds that the growth should be “safe” - a result from solid fundamentals and not stimulated by expansionary monetary or fiscal policy.

Summarizing, the zloty should remain fairly stable. The consolidation mode will probably not be threatened either by tomorrow's production data or Thursday's PMI readings from the Euro area. Only at the end of the week we may expect some more volatility due to incoming Ukrainian election (but only if tensions in the east part of the country remain in headlines).

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

Range EUR/USD 1.3750-1.3850 1.3850-1.3950 1.3650-1.3750
Range EUR/PLN 4.1800-4.2200 4.1800-4.2200 4.1800-4.2200
Range USD/PLN 3.0300-3.0700 3.0100-3.0500 3.0600-3.0800
Range CHF/PLN 3.4200-3.4600 3.4200-3.4600 3.4200-3.4600

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

Range GBP/USD 1.6850-1.6950 1.6950-1.7050 1.6750-1.6850
Range GBP/PLN 5.0900-5.1300 5.1100-5.1500 5.0700-5.1100

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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