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Daily analysis 03.04.2015

3 Apr 2015 13:19|Marcin Lipka

It is one of the most important days for the currency market this month – data from the American labour market. Conflict in Yemen reduces the pressure on the drop of oil in the short term. Zloty is slightly correcting in relation to the euro. Expected increased variability on PLN, in the moment of “payrolls'” publication.

Most important macro data (CET). Estimations of macro data are based on Bloomberg's information, unless marked otherwise.

  • 14.30: Change to the amount of jobs in the American non-agricultural sector (estimations: +245 thousand; unemployment rate: 5.5%; average hour salary: +0.2% m/m and +0.2% y/y).

Awaiting the data

Yesterday, we observed a clear wear off of the American currency. It was not caused by macro data, which have rather supported the buck. Thus, we can expect, that a part of the market wanted to close down the long positions on the USD, fearing today's weaker data from the across the ocean.

Additionally, referring to its traders from London and Toronto, Bloomberg informed that the funds which use high leverage, were purchasing mainly EUR/JPY. This, of course, also converts to the increase of EUR/USD. All of this information can be quite valuable, right after the “payrolls'” publication.

The economists' consensus assumes the reading on a level of 245 thousand. However, it is worth to notice that some pessimism is already included in the prices. Especially after ADP or ISM publications. Thus, one can assume, that only some figures below 220 thousand can cause the American currency's wear off. We can expect a bigger and more certain overvalue of the buck, if the “payrolls” will turn out to be below 200 thousand. If it happens, the exit above the limit of 1.10 can not be excluded.

On the other hand, “NFP” in the limit of 250 thousand (and of course higher) is a positive signal for the American dollar. It can quickly neutralize yesterday's movement, and the main currency pair would have a chance for finishing this week in limits of 1.07-1.0750.

However, if the reading would appear to be relatively neutral, the market's attention should concentrate on the increase of salaries. Crossing the consensus on a level of +2.0% y/y and 0.2% m/m, would be positive for the buck. The publication in limits of zero in m/m relation, and below two percent in comparison to March 2014, would be a signal to sell USD.

We should, however, still remember, that the surveys of Labour Department are burdened with quite a big error. Additionally, the economists' estimations, are also relatively discrepant with the official data. That is why in moments like these, it is better to maintain noncommittal, and judge the situation cold bloodedly when the dust settles. This was also suggested e.g. before the recent summit of the Fed .

Deal with Iran, and threats from Yemen

Recent negotiations concerning Iran, will be widely commented on in example studies, by the professionals dealing with international matters. Especially playing the matter of communication with particular societies, and a presentation of one's arguments to political opponents in the country, deserve a lot of attention.

In the matter of currencies dependant on resources described by us, the most crucial thing is the evaluation of oil. Of course, it decreased yesterday, but the reduction of price was not that dramatic. It can be a result of the increasing tension concerning Yemen. The air raids of alliance lead by Saudi Arabia, are for now not stopping Shi'ite rebels. Additionally, Houthis clearly intends to increase the pressure in the region, by controlling the strait, connecting the Red Sea with the Gulf of Arden. Over 3.5 million barrels of oil flow through it. As the Djibouti Ministry of Foreign Affairs informs, Shi'ite forces have transferred some extra weapons, on the small islands in the strait.

On the other hand, the “Financial Times” informs about Al-Kaida's attack on the city of Al Mukalla in southern Yemen. Until now, this city was outside of government power control. Extreme Muslims released a few hundred convicts from the local prison, and robbed several million dollars from the central bank's department, among others.

Three (Shiites, Sunnis and Al-Kaida), actually four (additionally also ISIS) forces fighting each other in Yemen, are causing the country to be devoured by chaos, and it is possible that Saudi Arabia will soon have to begin a military operation on land. Especially that fights are already occurring on Yemen's borders. There has already been the first victim on Riyadh's side.

The conflict in the region increases the risk of oil transport disturbances in that area. Despite the expected bigger supply for the resource from Tehran, it can cause the increases. In the short term, it could slightly help the currencies dependant on resources. In the mid-term, on the other hand (second half of the year), a bigger supply of oil, can again cause a strong pressure of drop. What follows, is a reduction in the Canadian dollar, the rouble or the Norwegian krona.

Few words about the foreign market

Due to the low liquidity and data from the USA, we can observe today some sudden movements on the dollar. The most significant of them will occur in the case of “payrolls”, which appear to be higher than 300 thousand. No confirmation of speculations about a weaker reading, could cause EUR/USD to exit in the area of 1.07. However, it is more likely that we will receive a slightly weaker result. If it will be connected with a relatively small increase in salaries (below +2.0 y/y), it will lead to limits of 1.10.

Zloty also awaits data

Readings from the American labour market should be relatively neutral for EUR/PLN. Although, by a clearly weaker publication (NFP and salaries), we should notice a decrease in the euro's value, in relation to the national currency. Better readings on the other hand, is a chance for the euro-zloty's increase by 0.01-0.02 PLN.

There should be much more action on USD/PLN. A cumulation of movement on EUR/PLN and EUR/USD, may result in fluctuations crossing a range of between 3.70 and 3.80 in the afternoon. From Tuesday, however, the market will again start looking at the matter of Greece. Thus, the first part of next week, there may be a chance for a slight wear off on the zloty.

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

Range EUR/USD 1.0750-1.0850 1.0650-1.0750 1.0850-1.0950
Range EUR/PLN 4.0600-4.1000 4.0600-4.1000 4.0600-4.1000
Range USD/PLN 3.7400-3.7800 3.7800-3.8200 3.7000-3.7400
Range CHF/PLN 3.8700-3.9100 3.8700-3.9100 3.8700-3.9100

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

Range GBP/USD 1.4850-1.4950 1.4750-1.4850 1.4950-1.5050
Range GBP/PLN 5.5400-5.5800 5.5200-5.5600 5.5600-5.6000

3 Apr 2015 13:19|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.

See also:

2 Apr 2015 17:42

Afternoon analysis 02.04.2015

1 Apr 2015 17:06

Afternoon analysis 01.04.2015

1 Apr 2015 12:44

Daily analysis 01.04.2015

31 Mar 2015 17:30

Afternoon analysis 31.03.2015

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