Daily analysis 20.03.2015

, author:

Marcin Lipka

Currencies stable after an exceptional volatility around the time of the Fed meeting. United eurozone leaves Greece no choice. Important statement from Lockhart. The zloty remains stable against most currencies and euro is quoted about 4.12 - 4.13 PLN.

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

  • 15:20 CET: Statement of FOMC member Dennis Lockhart about the American monetary policy.

Stabilization and negotiations

The market is trying to get itself together after changes which occurred after the last Fed summit. It's about both the revision of the future interest rates projection done by the Comittee as well as the historical high of volatility after the end of Janet Yellen's conference.

Then there's the Greece issue. Tonight may be a breakthrough for the case. After the meeting was held the prime minister Tsipras as well as chancellor Merkel presented the reporters with more optimistic comments on mutual trust and better perspectives for future negotiations. This time these could be more than just diplomatic talk.

Greece is financially speaking posed against the wall. Additionally, its aggressive attitude made even relatively friendly countries (e.g. France) turning back on Athens. The eurozone is aware of the fact that Greece has smaller and smaller negotiation possibilities and the prolonging help issue strengthens unity in the Brussel's position. Thus, it can be expected that within the next few days a breakthrough is going to happen and Greece will present the details of the reforms offered a month ago. This may be a good moment to generate some rebound on the euro.

Key statement from Lockhart

Today's statement from Dennis Lockhart might be of great importance for the dollar. The chairman of the Fed from Atlanta (voting, slightly dovish, views close to Yellen's) will be first key FOMC member to comment on the monetary policy after the last Fed summit. Interestingly enough, it was Lockhart who was quite optimistic about economy and the consensus regarding the monetary policy was based among others on his statement.

Lockhart stated in the beginning of February that he sees PKB increasing at the level of 3% both in 2015 and 2016. Additionally, he believed that the unemployment is around his personal estimates of the optimal level. His comments on inflation were equally hawkish. Lockhart predicted that it should slowly go up to the level of 2%. Moreover, he ignored the influence of weaker 2015 Q1 reading and took into consideration the shape of the foreign economy in the base case scenario he presented.

It will be crucial how Lockhart addresses his last comments. If he revises them downwards (very likely) as the whole Committee did, this could be a signal enough for a clear weakening on USD and EUR/USD raise.

The foreign market in a few sentences

Currently the market is looking for a sign to generate some movement from. It is very probable that EUR/USD will get higher during the next few sessions. A catalyst for that movement could be today's Lockhart statement. Should it be more optimistic that the one from February and closer to the Fed's consensus, then the chance for the dollar sale goes up and the week could close arount the level of 1.07.

The stable zloty. Chance for dollar below 3.85

The zloty has some appetite for generating the appreciation moves, what did not succeed so far. Today in the morning EUR/PLN fell below 4.12 just to get back to around 4.13. However, this should not change the estimates of 4.10 or below at the end of the quarter.

The dollar can still be cheaper today. If one of the key Fed members (especially in the foreign part) will be less optimistic about the American economy than they were in February and will come close to the Fed's consensus presented at the last summit, then some weakening of the USD on the international market can be observed and thus lower quotings of the greenback against the PLN.

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

Range EUR/USD 1.0650-1.0750 1.0450-1.0550 1.0550-1.0650
Range EUR/PLN 4.1000-4.1400 4.1000-4.1400 4.1000-4.1400
Range USD/PLN 3.8400-3.8800 3.8800-3.9200 3.8000-3.8400
Range CHF/PLN 3.8700-3.9100 3.8700-3.9100 3.8700-3.9100

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

Range GBP/USD 1.4850-1.4950 1.4750-1.4850 1.4950-1.5050
Range GBP/PLN 5.7400-5.7800 5.7000-5.7400 5.7800-5.8200

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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