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Afternoon analysis 19.08.2016

19 Aug 2016 15:30|Marcin Lipka

Currencies of the oil-exporting countries don't show a strong reaction on changes in prices of this raw material. The zloty is still burdened by weaker macro data. However, a further wear-off is not the base case scenario.

We haven't been writing much about oil over the past few days. However, one of the basic energetic resources increased clearly since the beginning of August. Two weeks ago, the Brent oil was near the level of 40 USD per barrel and now it exceeds 50 USD.

This is partially a responsibility of the latest EIA data. It states that the supply of oil, as well as fuel in the USA decreased. Therefore, the supply range is decreasing as well. Let's keep in mind that it allowed for a significant decline of prices in the first half of summer. However, the main reason for a strong rebound were the comments from the OPEC, as well as from Russia, regarding possible actions that are to stabilize the market.

Financial investors, who very often cause sudden moves in a relatively small range of fluctuations, probably don't believe the possibility of freezing the production at a specific level. Similar discussions in the second quarter have caused a significant increase in prices.

This is mainly these investors that reduce the decrease positions and cause a significant increase in prices of oil. However, there are no reasons for further serious growths. Moreover, appreciation within the range of next 20% is very unlikely, especially that the market has not balances yet. Over the next few months, the supplies may begin to increase yet again, especially if the winter on the north hemisphere is mild.

Regarding currencies of oil-exporting countries, we are dealing with far lower fluctuations against price of oil than it was in 2015. It's most likely that investors began getting used to sudden growth caused by sudden moves within the range of 40-50 USD per barrel, instead of serious declines. Therefore, they would not cause a serious economic danger for Russia, as well as wouldn't mean a milder monetary policy in Norway.

As a result, the 20% growth of oil caused a higher evaluation of the rouble against the dollar by approximately 5%. However, this appreciation is partially caused by a general wear-off of the dollar in the wide market. It has lost more than 2% against the currency basket. Growths on oil had an even smaller impact on the Mexican peso, as well as the Canadian dollar. The raw material currencies should be relatively resistant to the signals from the oil market, unless the quotations start growing above the 55-60 USD per barrel range or go below 35 USD.

When it comes to the zloty's behavior this afternoon, it's consistent with what we have saw after weaker data from the Polish economy yesterday. Apart from an overvalue against the euro or the dollar, the Poilsh currency is approximately 0.5% cheaper against the forint as well. This confirms that during the past twenty-four hours, the move on the zloty has been related to an internal economic condition, as well as a larger probability of a decrease in interest rates, instead of the global situation. We also expect the zloty to remain weaker against the main currencies, as well as the forint at the beginning of next week.


19 Aug 2016 15:30|Marcin Lipka

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 acknowledgement of the source is prohibited.

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