Afternoon analysis 27.11.2014

Even as the the European Central Bank supported economic sentiment, it didn't stop the private credit shrinkage. The rouble rose in spite of oil price drop. After recent gains, the zloty was stable.

The absence of the US investors in the market caused low volatility. Today the major market driver is the OPEC meeting what may result a decision to cut production as a way to support falling price. Nevertheless, despite the outcome of the meeting, the oil price will probably continue its move down due to lack of solid arguments to gain (a wider view in our yesterday's commentaries).

However, interestingly looked the rouble. The Russian currency rose after two days of significant losses spurred by the falling oil price. Probably the currency was supported by information about Venezuela supporting the proposition to cut the output. A positive scenario for the oil price is not very likely due to lack of support for that solution from Arab countries.

The German unemployment dropped

The latest data coming from Germany pointed at a deterioration of economic environment. The poor grade was little improved by some quite good short term indicators (the ZEW and Ifo indices). However, the labor market performance supported the notion that the major European Union economy will soon be in good shape.

The unemployment rate fell to 6.6 percent against 6.7 percent projected. In the previous month the unemployment rate stood at 6.7 percent, but it was revised down to 6.6 percent. Number of unemployment people dropped 14k to 2.87 million – more than expected. Additionally, the consumer sentiment index also surpassed expectations.

Private credit was down

The European Central Bank informed that the M3 money aggregate rose 2.5 percent on a yearly basis – less than 2.6 percent anticipated. However, more important is that private credit shrank 1.1 percent. It was below minus 1 percent anticipated and credit dropped 1.2 percent in the previous month. It is a solid argument for the ECB to pursue a case for quantitative easing.

Mario Draghi's effort to restore confidence in the euro zone was reflected in today's data on economic sentiment. The European Commission informed that sentiment improve in almost every examined category. The gauge measuring confidence among companies and households rose to 100.8 from 100.7 – more than 100.3 expected.

Last two weeks showed increasing willingness to introduce full quantitative easing in the euro zone as the ECB president Mario Draghi spoke about purchases of government bonds few times. The ECB vice-president Vitor Constancio said yesterday that the beginning of 2015 may be appropriate to assess whether the full QE is needed as recently used measures will influence the economy. Tomorrow Eurostat shows the inflation data. Price growth of 0.3 percent in expected. That will mark the lowest level since 2009.

Nevertheless, the final introduction of the QE is still very distant. The Bundesbank president Jens Weidmann in the main opponent of additional measures. He is supported by its traditional allies – Austria and Holland.

Today's data from the euro zone pushed the euro lower. The EUR/USD returned to drops after three days of gains.

The zloty is stable

After significant gains in the first half of the week, the zloty on Thursday was stable. The diminishing chance for interest rates cut (a wider view in our morning commentary) is supporting the Polish currency. If reports on GDP and PMI don't surprise, the currency will continue to growth.