Daily analysis 24.02.2016

, author:

Marcin Lipka

The pound is at its lowest level to the dollar since March 2009. The chance for an agreement between oil producers decreases after yesterday's statements from Al-Naimi. Will the perspective for the euro change due to the Brexit? The zloty remains relatively stable to the euro.

Most important macro data (CET – Central European Time). Estimations of macro data are based on Bloomberg information, unless marked otherwise.

  • 15.45: PMI index for the American services sector (estimations: 53.5 points).

Pound clearly wears off

Pressure on the British currency is increasing. During the Asian session, the GBP/USD went below the level of 1.4000, and before noon “the cable's” value was within the area of 1.3900. The pound is currently sensitive to the global sentiment, as well as expectations concerning the Brexit.

Uncertainty concerning the future condition of the pound, can be intensified by a survey published by the Bloomberg agency. It regards hypothetical behavior of the GBP/USD, in the case of the Brexit. Twenty-nine out of thirty-four economists claim that if the British decide to leave the European Union, “the cable” will go to the level of 1.35 or lower, which would be its 30-year minimum.

Moreover, 20 out of 34 surveyed think that the GBP/USD will go below 1.30, and seven of those surveyed say that the pound will cost less than 1.20 dollar, only one week after announcing the results of the referendum. In the survey, economists take note of an outflow of capital from the United Kingdom, and an ongoing deficit of the current account. Moreover, in their opinion the economic growth is weaker than expected, and the monetary policy of the Bank of England has a significantly milder perspective.

Even though the incoming surveys are still not unambiguous, they show however, that the opponents of the Brexit have a slight advantage. YouGov conducted a study based on e-mail surveys sent between the 21st and the 23rd of February (after the agreement in Brussels, and Boris Johnson's statement). It shows that 38% of those surveyed are for leaving the EU, and 37% are against it. Previously (on February 4th), a similar YouGov study ended with a result of respectively 45% and 36%.

On the other hand, a phone survey conducted by ComRes, shows that 51% are for staying in the European Union, and 39% want to leave its structures. On February 14th, these proportions were respectively 49 against 41. The Telegraph published the average result of the six most recent studies. It shows that 46% are for the Brexit, and 54% are against it. On February 15th, the relation was exactly 50/50.

However, the market will probably wait for more surveys (via phone, as well as e-mail), in order to become convinced to a specific concept. Before the previous parliament elections in the United Kingdom, the surveys showed that the chances of the Labor Party and the Conservative Party are equal. The final result, on the other hand, was a 7% victory of David Cameron's party over Ed Miliband's Labor Party.

Thus, we can expect that the pressure on the pound remains significant, especially if uncertainty regarding Brexit is intensified by an increase in risk aversion. This scenario would not exclude a test of 30-year minimum on the level of 1.3500 even before the final result of the referendum.

Further sale of oil

Yesterday, we were once again dealing with a clear sale on the oil market. It was caused by comments from Iran about excluding Tehran from participating in the concept of freezing the production on a current level. On the other hand, statements from the Saudi Arabian minister of oil and raw materials could lead to conclusions that the chances for freezing the production are smaller than previously expected, which could be caused by suggestions from Nigeria and Russia, among others.

Moreover, the API data about the American oil supplies, increased by 7 million barrels. This is much more than the Bloomberg consensus, which expects today's EIA publication to show an increase in supplies by 3.25 million barrels.

Few words about the foreign market

The European currency is also worth noting, in the context of oil and the pound. If the expectations regarding the Brexit increase, a similar discussion may even appear in other countries in the European Union. A hypothetical disintegration of the EU is also a danger for the European currency. Additionally, if the sentiment is deteriorated, we may experience a fundamental change in viewing the euro, and return to the concept that risk aversion increases the pressure on the EUR. If this attitude begins to dominate the market, the dollar would be its definite beneficiary. It would gain against the euro, as well as the pound. This could clearly increase the likelihood of the EUR/USD reaching the area of 1.05, this move could be especially accelerated by the monetary easing of the ECB.

Zloty is relatively stable

The national currency remains relatively stable to the euro, and before noon it strengthened, despite an increase in risk aversion. The zloty also gains value to the forint. Although in this case, the move is caused mainly by the suggestions from the vice-chairman of the Hungarian Central Bank, concerning an easing of the monetary policy, and a wider weakening of the HUF. However, if the sentiment is negative, it will be difficult for the zloty to gain value, even with a milder monetary policy in the euro zone and Hungary.

On the other hand, when it comes to the behavior of the pound to the zloty, it is definitely better to observe the behavior of the EUR/GBP than the GBP/USD. The euro should grow to the pound in the Brexit perspective. However, this move will most likely be significantly smaller than the appreciation of the dollar to the pound. Thus, even if “the cable” goes to the level of 1.20, the British currency will probably still cost more than 5.00 PLN.

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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