Afternoon analysis 12.01.2016

The global market sentiment improved as the Chinese turmoil eased. Speculations that the OPEC may meet limited pressure on the oil price. The zloty cut losses. The Polish currency stayed at the low level.

Easing tensions in China was exploited as an opportunity to rebound after the latest declines (more on the issue in the previous commentary). Gains prevailed in the European markets. The US futures also gained. Moreover, commodities halted declines.

However, the durability of the move will be soon tested. On Wednesday the data on the Chinese international trade is scheduled. The report is rather important and it may reignite volatility if it misses the forecast. All in all, the expectations are rather negative. Export is forecast to drop 8 percent and import 12 percent on a yearly basis. The trade surplus is expected at 53 billion dollars.

High probability that the report will miss the forecast limits the chance that the current rebound will continue. The sentiment improvement was apparent in the currency market. However, as the situation is based on the Chinese basis, one can conclude we see only a short term rebound. Notably that there was no arguments that are enough to expect the situation improvement is permanent.

OPEC meeting

Oil price dropped today near 30 dollars - to the newest 12 year low. However, in the second part of the session it rebounded, which resulted is some improvement in the market sentiment. Today the Russian rouble dropped on record against the dollar. The USD/RUB exceeded 76.60. Other commodity currencies were also under pressure.

Bloomberg agency reported that the Nigerian government is expecting an emergency OPEC meeting. A normal meeting is scheduled on June, and the emergency talks may take place in March. Moreover, some OPEC countries negotiate with non-cartel oil producers to limit output as a measure to shore up prices. If there is some breakthrough in the issue, the oil price may rebound. A similar scenario will help the commodity currencies.

New MPC

Today candidates to the Monetary Policy Council were interviewed in the parliament. On 20 January Andrzej Bratkowski and Elzbieta Chojny-Duch will leave the MPC. It is almost certain they will be replaced by Grazyna Ancyparowicz and Eryk Lon. On 24 January Andrzej Rzonca, Jan Winiecki and Jerzy Hausner leave and the will be replaced by Eugeniusz Gatnar, Jerzy Kropiwnicki and Marek Chrzanowski.

Given the remarks that the candidates made during the interview (according to PAP), the new MPC will be eager to support the economy using the monetary policy measures. Only Jerzy Kropiwnicki was rather skeptical to similar measures. As a result, the expectations for interest rates cut increased. It was reflected by the FRA quotes.

The zloty remained under the influence of the global market situation. The risk factors are China and the rising probability of interest rate cuts. As a result, the probability of a stronger zloty is rather limited.