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Daily analysis 24.04.2015

, author:

Marcin Lipka

Worse data from the USA and reports after the Tsipras - Merkel - Hollande meeting improved the quotings on EUR/USD. The German Ifo relatively high, taking into consideration yesterday's PMI. Watch out for Wednesday's Fed meeting. The zloty remains stable against the euro and is now above the level of 4.00.

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

  • 14.30 CET: the durable goods orders in the USA for March (survey: +0.6% m/m, excluding transportation: +0.3%).

Greece and the data

Thursday's optimistic reports, which came during the meeting of Tsipras with Merkel, Hollande and Juncker, built some solid foundations for a stronger rebound on the EUR/USD. Additionally, this movement was strengthened by worse data from the US real estate market. New house sales fell to 481 thousand y/y in March, below the anticipated 515 thousand. This, of course, raises the likelihood of Wednesday's Fed meeting being more dovish than expected.

This morning, however, the reports regarding Greece weren't as optimistic. It is worth paying attention to the Dombrovskis comments. One of the vice-chairmen of the European Commission, actively participating in the events connected to Greece, stated before 8:00 that the technical issues have not yet been specified and an agreement during the eurogroup meeting in Riga is not to be expected. This, however, did not stand in the way of the main currency pair reaching the level of 1.0900 at 9:00.

Therefore, yesterday's movement on the currency market, which can to some extent be justified by lowering the risk of Greece exiting the eurozone, should be separated from today’s rebound. It was clearly set to activate the stop-loss orders from the positions against the European currency. The second movement can be corrected if the meeting in Riga ends with some laconic statement.

Except for the US data it is also worth paying attention to the German Ifo reading published today. This indicator, which describes the sentiment of the companies over our Western border raised above the expectations (108.6 vs 108.4), although it should also be emphasized that the part describing the current situation also contributed to this appreciation. The overtaking subindex fell a little, conforming the slight weakening, visible on yesterday's PMI. However, these readings still show the relatively good situation in Germany.

The Fed

Even though, it is most probable that the discussion regarding Greece will not end until Wednesday's Fed meeting, the most important factor will be the speculations concerning the future decisions of the Fed. There is a hard task ahead of the Federal Open Market Committee. It needs to decide whether to ignore most of the weak readings and accept them as temporary, or to take them into consideration when planning future decisions.

If Janet Yellen and her colleagues are concerned with the strong dollar, which causes the competitiveness of exports to fall, lower the inflation and influences the companies' profits in a negative way, then it will mean that the date in September or raising the interest rates does not need to be final. This should weaken the American currency, especially if the news about Greece is neutral or positive.

The foreign market in a few sentences

No decision during the Riga summit can generate some fall pressure on the EUR/USD during the Friday session. On the other hand, however, the meeting of the Fed next week should be relatively dovish. Mixed macro data, a stronger dollar and the uncertainty concerning the situation in Europe will not be in the Fed’s favour after the monetary policy tightening.

The minutes from yesterday's Monetary Policy Council's (RPP) meeting were in no way crucial. The Council sees some chance for economic growth this year, caused by the situation improvement abroad and a better labor market situation. There are some reports concerning the zloty strengthening, however, these were relatively mild and do not suggest that the Polish National Bank (NBP) was about to intervene in order to weaken the domestic currency.

More volatility can be expected from Wednesday's Fed meeting. Clear concern about the weak macro data and the stronger dollar should help the EUR/PLN return to below the level of 4.00. On the other hand, if the Fed ignored the worst readings and prepared the market for the interest rates raise (less likely), then the dollar should stay above the 4.00 PLN level throughout the whole of next week.

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

Range EUR/USD 1.0650-1.0750 1.0550-1.0650 1.0750-1.0850
Range EUR/PLN 3.9800-4.0200 3.9800-4.0200 3.9800-4.0200
Range USD/PLN 3.7100-3.7500 3.7500-3.7900 3.6700-3.7100
Range CHF/PLN 3.8500-3.8900 3.8500-3.8900 3.8500-3.8900

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

Range GBP/USD 1.4950-1.5050 1.4850-1.4950 1.5050-1.5150
Range GBP/PLN 5.5600-5.6000 5.5200-5.5600 5.6000-5.6400

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 Cinkciarz.pl Sp. z o.o is prohibited.

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