Daily analysis 20.05.2015

, author:

Marcin Lipka

Reactions after publication of Benoit Coeure's speech, are still causing pressure on the European currency. Data from the USA are good, but mainly to a rebound in the region, which was least harmed by the winter. „Minutes” are in the spotlight. The zloty remains stable in its relation to the euro. Today's data should not have greater impact on the PLN.

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

  • 14.00: Industrial production from Poland (estimations: +5.5% y/y).
  • 14.00: Industrial sale from Poland (estimations: +1.0% y/y).
  • 20.00: Record from the recent summit of the Federal Reserve.

Further consequences of Benoit Coeure's speech

The market is beginning to widely discuss Benoit Coeure's speech. It's because of many matters. Most of all, it was an element of surprise. Right after the start of the European session, the information agencies informed about the EBC’s willingness to bring forward a part of the assets purchase from summer to the forthcoming weeks.

Despite this decision, the whole operation is not increasing. However, an acceleration in purchasing bonds can cause some serious changes on the debt instrument market. Profitability of 10 year old treasury bonds decreased from a few to a few dozen basis points. This on the other hand, has as usual, overvalued the European currency.

Some also speculate that the increase in the treasury bonds' purchase should prevent the commotion on the debt instruments' marker, in case the situation related to Greece will deteriorate.

It can also not be excluded that the EBC was concerned with the general increase of variabilities. This includes the German 10 year old bonds, which profitability increased in short time from few to 80 basis points. Such suggestions also appeared on Coeure's speech itself.

It is also probable that the recent increases of the euro were not advantageous for the EBC. The common currency has enforced in relation to the main currencies, by a few percent. If this trend continues, the European currency would be higher than before the announcement of purchasing the assets. This on the other hand would make it difficult for the inflation to return to its target, or improve the competitiveness of the peripheral states.

One more concept was added yesterday by Christian Noyer. This member of the EBC said, that the central bank is ready to extend the operation of bond's purchase if necessary. This information has been repeated many times (by Draghi among others). However, stating it at this current moment only reinforced Coeure's message. Thus, it should completely exclude ending the program earlier, due to the fact that the inflation will hit the target faster than expected.

The matter of Coeure's speech publication itself is also worth noticing. Usually every important speech from an EBC member is immediately available on the website. But not this time. The first ones with access to it were the participants of the conference at the Imperial College, representatives of central and investment banks, hedge funds, and the university. The EBC members explain that the publication was withheld due to technical problems. However, dissatisfaction remained. Especially that this information had a clear impact on the behaviour of the debt instruments, currencies, or shares.

Data from the USA

At first sight, yesterday's data appeared to be good. However, if we look at the whole publication of the Department of Commerce from the real estate market, the better reading appears to be a result of increased number of permissions for construction work, and investments initiated in the northern east of the USA. It's because of the fact, that this market practically died in the winter months.

Currently the weather has improved, which has revived the real estate market. This has cumulated in the data for April. As a result e.g. permission for construction work in the eastern States, increased by 85% m/m, and 52% y/y. It is obvious though, that such a tempo is impossible to maintain. Thus, the FOMC will probably not take this data too seriously. Especially because during the summit in April the Fed claimed that “the revival on the real estate market remains slow”.

Few words about the foreign market

The publication of record of the Federal Reserve's April summit will be the main event for today. The number of members assuming the raise in June must have decreased, considering that the announcement itself was relatively dovish. We can also receive a few suggestions that the revival in the USA is weaker than expected. Thus, there is a small chance that the market will take the publication as hawkish. On the other hand, the market's reaction can be muffled, if we consider tomorrow's PMI from the eurozone (it will probably not elicit positive surprise), and Janet Yellen's appearance on Friday.

Stabilisation as a base scenario

Today, the Polish market will concentrate on the publication from the national economy for a moment. However, considering the amount of events on the market (the Fed, the EBC, Greece), we will observe its clear influence on the zloty only if the readings visibly deflect from the economists' estimations.

The consensus published by the Bloomberg agency assumes that the retail sales will increase by 1.0% y/y, and the industrial production by 5.5% y/y. The difference on each reading would have to amount to at least one and a half percent, in order to cause a movement bigger than 0.01 PLN on the EUR/PLN. Of course, the rule “the better the data, the stronger the zloty” is still in force.

However, the base scenario for the forthcoming hours is the maintenance of the zloty to limits of 4.05 in relation to the euro, and slightly below the area of 3.90 in relation to the franc.

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

Range EUR/USD 1.1050-1.1150 1.0950-1.1050 1.1150-1.1250
Range EUR/PLN 4.0400-4.0800 4.0400-4.0800 4.0400-4.0800
Range USD/PLN 3.6300-3.6700 3.6700-3.7100 3.5900-3.6300
Range CHF/PLN 3.8600-3.9000 3.8600-3.9000 3.8600-3.9000

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

Range GBP/USD 1.5550-1.5650 1.5450-1.5550 1.5650-1.5750
Range GBP/PLN 5.6400-5.6800 5.6000-5.6400 5.6800-5.7200

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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