Daily analysis 28.08.2015

, author:

Marcin Lipka

The currency market is still strongly dependant on the condition of the stock markets. What will be the conclusion of the meeting in Jackson Hole? Tsipras loses support in Greece. The zloty remains under pressure to the main currencies, but the EUR/PLN should not cross the level of 4.25.

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

  • 14.30: Expenses and American income in July (estimations: respectively +0.4% m/m and +0.4 m/m).
  • 14.30: Index of the OCE base case inflation in the USA (estimations: +0.1% m/m and +1.3% y/y).

Jackson Hole in the centre of attention

The currency market is still strongly dependant on the events of the American stock markets. When the floors in the USA are showing increases, an appreciation of the dollar can be expected. Also, the value of the euro decreases. The European currency is considered as the one financing the carry trade. As a result, an overlap of these two movements, can cause relatively sudden changes on the EUR/USD over one day.

The above mentioned dependency should remain unchanged, also after the meeting of bankers in Jackson Hole. The general message from the monetary authorities (from the developed as well as emerging markets) will probably overlap with the approach of William Dudley.

The Fed takes note of the situation development in Asia and the dangers related to a slowdown in China. However, if the situation calms down, the Federal Reserve will return to the base case plan, which is an increase in interest rates by the end of the year. This information should come from the official testimonies, as well as interviews for the media.

In the case of this scenario being fulfilled, the approach at the beginning of next week should be relatively positive. This means appreciation of the American currency and even a test of the area of 1.1200 despite an increase in the main currency pair this morning.

On the other hand, if the weekend brings another deterioration in the situation of Asia, it will be much more difficult to calm the situation down. However, considering the recent events, as well as the active policy of the PBOC which revives the real economy, it is a very unlikely scenario.

Commotion in Greece

The Greek procedures regarding earlier elections demand appointing a new prime minister, who will be on the post until 20th of September. The person appointed to this position is the current chairwoman of the highest court, Vassiliki Thanou. However, nobody expects her to perform any changes before the end of the next month.

Thus, the game will be mainly about gaining support by Alexis Tsipras’ Syriza, and the New Democracy. What is interesting, the popularity of Tsipras decreases. According to the latest survey conducted by ProRata, published in the Efimerida ton Syntakton newspaper, his support is 23% in comparison to the 26% gained on 2nd July. On the other hand, support for the New Democracy increases. The party's popularity grew from 15% to 19.5%.

This fact causes the chances for Tsipras’ independent reign to decrease. However, it currently does not lessen the probability of fulfilling the agreement between Greece and its creditors. Tsipras, as well as the New Democracy, support it. An unstable government can generate many problems for the country, including another election. However, the market should ignore this danger for the time being.

Few words about the foreign market

A conclusion from the central bankers' meeting in Jackson Hole should be close to what William Dudley recently presented. Also, the Bloomberg television will broadcast the interview with James Bullart at 13.30. Just a few weeks ago he supported the idea of hikes in September more than Dennis Lockhart, who recently smoothed out his standpoint. If Bullard also withdraws from the September term, this will practically decide about leaving the interest rates unchanged for at least the next two months.

However, there is a small chance that this event will harm the dollar. The American currency will rather be supported by the relatively positive comments after Jackson Hole.

Weakness and stabilisation at the same time

Quotations of the EUR/PLN remain relatively stable. However, it is worth noting that a significant overvalue of the EUR/USD should cause a slight depreciation of the EUR/PLN. It did not happen and the euro costs as much as it did in the last few days. On the other hand, the dollar clearly gained in value. This shows a general weakness of the national currency which may reverse only in the moment of a clear decrease in anxiety regarding Asia.

Today's session on the EUR/PLN should be relatively calm, and the range of fluctuations between 4.22-4.25 should be maintained. More variabilities can be observed on the dollar. However, before Saturday's testimony from Stanley Fisher, the changes on the wide market can be limited, in comparison to what has been observed over the past few days.

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

Range EUR/USD 1.1250-1.1350 1.1350-1.1450 1.1150-1.1250
Range EUR/PLN 4.2100-4.2500 4.2200-4.2600 4.2000-4.2400
Range USD/PLN 3.6900-3.7300 3.6700-3.7100 3.7100-3.7500
Range CHF/PLN 3.8900-3.9300 3.8900-3.9300 3.8900-3.9300

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

Range GBP/USD 1.5450-1.5550 1.5350-1.5450 1.5550-1.5650
Range GBP/PLN 5.7800-5.8200 5.7600-5.8000 5.8000-5.8400

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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