Daily analysis 25.11.2015

, author:

Marcin Lipka

Thanks to an improvement in sentiment on the capital markets and an article from Reuters about possible ECB actions, the main currency pair is testing the area of 1.0600. Data from the USA is in the centre of attention. The zloty is visibly weaker to the euro and the dollar.

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

  • 14.30: Orders for durable goods in the USA (estimations: +1.7% m/m; with exclusion of transport: +0.3 m/m).
  • 14.30: Expenses and incomes of the Americans (estimations: respectively +0.3% and +0.4%).
  • 14.30: The PCE inflation from the USA (+0.2% m/m and +0.3% y/y; with exclusion of fuel and food +0.1% m/m and +1.4% y/y).
  • 14.30: New jobless claims from the USA (estimations: 270k).
  • 15.45: The PMI from the services sector in the USA (estimations: 55.1 points).
  • 16.00: Sale of new houses in the USA (estimations: 500k; +6.8% m/m).

Testing of the EUR/USD minimums

Yesterday, theoretically one could expect an increase in chances for a correction on the main currency pair. An increase in risk aversion measured by the condition of the foreign capital market among others, became higher on Tuesday. This recently causes an appreciation of the EUR/USD. Most of all due to a reverse in carry trade position on the euro, and decreasing expectations regarding an increase in the American interest rates.

Additionally, yesterday's publication of consumers' index from the USA was visibly worse than expectations (90.4 points vs 99.5 points), and at the same time lowest since September 2014. This could also slightly wear off the dollar. On the other hand, according to today's quotations the market is still very sensitive to actions of the European Central Bank (ECB).

Shortly past 10.00 CET, Reuters published an article with speculations about a possibility of the ECB using two-level deposit rate, based on anonymous statements of people related to the central bank. One could assume that it would work similar to the one used by the Swiss National Bank (SNB). It would mean that some deposits are excluded from negative interest, but at the same time this method would give the ECB more space to decrease deposit rate for the rest of market's participants. There are also speculations regarding the purchase of assets with a lower loan credibility.

This on the other hand, may announce that the ECB is even more determined to loosen the monetary policy than the market would expect. Even if the above mentioned tools are not introduced, an increase in purchase of bonds from the market can be more aggressive than expectations. Overvalue of the euro is additionally increased by growths on the stock markets. Recently they have a negative correlation with the European currency.

A lot of macro data

Due to the Thanksgiving Day in the USA on Thursday, today we received a lot of data from the American economy. The most interesting are orders for durable goods, and the PCE base case inflation. If the prices with exclusion of fuel and food go above the level of 1.4% in year on year relation, we can expect an appreciation on the American currency.

It is also worth remembering about the PMI services reading. Even though the Markit data have a shorter history than the widely analysed ISM publications, in the moment of changes in monetary policy they may be a good hint before publications from the Institute for Supply Management. After 16.00 we will find out about the situation on the American real estates market, which is measured with the sale of new houses. Recently the readings regarding the condition of this section of economy, are slightly disturbed by the local factors. They are floods in the southern part of the USA. However, this time the publication should be already free of these unusual factors.

Few words about the foreign market

The article from Reuters saying that the ECB may be ready for a deeper than expected monetary easing, caused a visible overvalue of the euro, and a depreciation of the EUR/USD to the area of 1.0600. Additionally, if today's data from the USA is good, there is a chance for an extension of the morning impulse. If it happens, the main currency pair may get really close to the area of 1.05, which is this year's minimums.

The dollar costs more than 4.02

The American currency increases its 11-year-old peaks to the zloty, and the USD/PLN pair crossed the level of 4.02. This movement was caused by two factors. Yesterday's geopolitical incident not only caused a depreciation pressure on the rouble and the lira, but also on the zloty. The national currency wore off by approximately 0.01-0.02 PLN to the main currencies. Today on the other hand, value of the zloty was pulled down by the speculations regarding the ECB actions.

Theoretically, if the ECB monetary easing is more aggressive, the zloty should be stronger to the euro. However, the global situation did not allow the PLN to enforce to the EUR. On the other hand, stronger USD causes a visible growth of its price to the level of 4.00. However, it is worth noticing that when the global tension decreases, the EUR/PLN should return to the area of 4.25.

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

Range EUR/USD 1.0650-1.0750 1.0750-1.0850 1.0550-1.0650
Range EUR/PLN 4.2400-4.2800 4.2400-4.2800 4.2400-4.2800
Range USD/PLN 3.9600-4,0000 3.9200-3.9600 4.0000-4.0400
Range CHF/PLN 3.9200-3.9600 3.9200-3.9600 3.9200-3.9600

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

Range GBP/USD 1.5150-1.5250 1.5050-1.5150 1.5250-1.5350
Range GBP/PLN 6.0600-6.1000 6.0200-6.0600 6.1000-6.1400

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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