Daily analysis 23.03.2015

, author:

Marcin Lipka

Further increases of EUR/USD after the morning disturbance. In the upcoming hours we will witness some important appearances from Federal Reserve members. Tsipras – Merkel meeting. Tuesday readings of PMI from Euro Zone. Bloomberg interview with Belka, concerning the topic of capital's inflow to PLN. Euro in limits of 4.13,and franc in the areas of 3.90.

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

  • 16.45 CET: Statement from Federal Reserve vice president Stanley Fisher, about the monetary policy (according to “WSJ”, the appearance will start at 17.20 CET).
  • 03.15 CET (Tuesday): Statement from San Francisco Federal Reserve chairman, John Williams.
    • Greece and Fed

      Today's session has started with clear drops on EUR/USD, below the limit of 1.0800. Anxiety on the markets was caused by clear decreases on the oil market and reductions of prices on European stock markets. However, it was probably a short term market game, which aim was to “frighten” the market, and to gather short positions. Few quarters later, the main currency pair was clearly above 1.0850.

      The matter of Greece continues. In the morning 'The Financial Times' published a letter, which was sent by prime minister Tsipras to Angela Merkel. The document passed on by Greek politician was so unclear, that the British journal had to publish an additional key, so that everything could be understandable. It is still difficult to say, how much of all this information is Syriza's game with their electorate, and how many are real demands. We however, still think that emptiness in Greek budget, will force the populist government to compromise, and it will probably occur within upcoming days.

      Statements of Federal Reserve members, are at the moment significantly more important for the condition of EUR/USD. On Friday afternoon Dennis Lockhart claimed, that he slightly decreased the estimations of future economic growth, but he still thinks that a proper moment for tightening, is the period between June and September. However, Atlanta's Fed chairman also added, that the inflation is on a lower level than he expected, and increase of dollar's value which lowers export, is a disturbing element. Thus in general, Lockhart who was relatively optimistic in the beginning, became more dovish. This view is coherent with what the whole Committee has presented on previous Wednesday.

      One should also follow the statements of Federal Reserve members in the upcoming hours. Any comments from Stanley Fisher who will appear in New York, or John Williams whose appearance is planned for the night, that will confirm the anxieties related with lower inflation and increase of GDP, and also indicating negative effects of stronger dollar, will be a good argument to continue the present increase wave. They should also bring us closer to the areas of 1.10 on EUR/USD.

      Important PMI and IFO

      Relatively optimistic information from the European economy in the first months of the year, activating QE by EBC, or maintaining lower prices of oil, should significantly improve tomorrow's reading of PMI. If the German logistics managers index from the industry would clearly cross the level of 52, and the French would break through the limit of 50, we can observe a clear enforcement of European currency.

      The next day we have also received a reading of German Ifo. Thus the market will have something to play for, at least until Wednesday morning, when the surveys describing the condition of our western neighbour's entrepreneurs will hit the market. If the scenario's development will be advantageous for the bulls, we can observe the approach to 1.10, already in the middle of current week.

      Few words about foreign market

      Combination of Federal Reserve members, and solid readings from the eurozone can cause, that the main currency pair will test the areas of 1.10 relatively fast. We will have to wait however for more durable solution concerning Greece, in order to see the exit above this level. And after today's meeting of Merkel and Tsipras, we should not expect any breakthrough.

      Stable zloty. A chance for the dollar going below 3.85

      Apart from improving global situation, which tends to maintain the view about appreciation of zloty in relation to euro, it is worth quoting today's statement of chairman Belka. In his interview for Bloomberg, the president of NBP, showed his satisfaction with stability of national currency, but at the same time, he claimed that strong appreciation trend would be a threat. Although, according to Marek Belka, it is an unlikely scenario.

      Additionally, Belka claimed (what is also included in previous report about inflation) that the limit rate of export's profitability, is 3.90 PLN per euro. However, the chairman added that it is not a level, which is “carved in stone”. It can be understood as a signal, that crossing it downwards, would not cause the changes in monetary policy, nor necessity of currency intervention.

      Unfortunately, despite EUR/PLN exiting in the areas of 4.12-4.13, franc is still relatively high. It is caused by the fact, that EUR/CHF is still below the level of 1.06. Part of the market is clearly quite upset, with the lack of specific decisions from SNB, and despite the increase of EUR/USD, it does not intend to purchase euro I relation to franc. Thus, the level of 3.90, or even slightly higher, can be a target for the upcoming days.

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

      Range EUR/USD 1.0850-1.0950 1.0750-1.0850 1.0950-1.1050
      Range EUR/PLN 4.1000-4.1400 4.1000-4.1400 4.1000-4.1400
      Range USD/PLN 3.7600-3.8000 3.8000-3.8400 3.7400-3.7600
      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 5.6400-5.6800 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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