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Daily analysis 04.02.2015

4 Feb 2015 12:49|Marcin Lipka

One of the largest EUR/USD jumps in a year after Greece eased some tensions. Significant rebound on the commodity currencies after 20% rebound on the oil. The zloty remains fairly strong before today's MPC meeting. The Swiss franc is traded around 3.95 PLN.

Macro data (CET- Central European Time). Survey is supplied by Bloomberg unless otherwise noted.

  • Between 12.00 CET and 14.00 CET: Interest rate decision in Poland.
  • 14.15 CET: The ADP report from the USD (survey 220k).
  • 16.00 CET: Marek Belka conference after the MPC meeting.
  • 16.00 CET: Non-manufacturing ISM index from the US (survey: 56.4 points).

Strong rebound on the EUR/USD

The last session on the EUR/USD was pretty interesting. Yesterday we mentioned that if the most recent stagnation on the common currency ended, the move may be quite volatile especially if the buying side would get more active. It was mainly due to the fact that still many medium-term speculators are positioned for a further decline. A sharp rise, on the other hand, can cause that some of them decide to close their position to secure profits and some will be forced to quite the market because they entered it too low. This was probably the major issue behind yesterday's EUR/USD jump.

EUR/USD oin the last 5 days

Kurs euro do dolara

Source: Bloomberg. The EUR/USD raise means the strengthening of the common currency to the American dollar.

Almost any move on the currency market needs to have some reason regardless how valid it is. This time the euro appreciation was caused by some easing regardless Greece. However, what is more interesting the “FT” article which presented Athens' proposal was available since the morning while the appreciation started in the afternoon. Moreover, the move was pretty broad, and was also accompanied with 10% jump on Greek stock exchange. Higher valuations were also observed across the pond where US indexes, supported also by oil stocks, ended the day on hefty gains.

Partially the common currency is also supported by the situation on crude oil. In the recent weeks, the WTI or Brent slump was regarded by some market participants as an indicator of future subdued growth. As a result it was the element which increased the risk aversion what is usually negative for the euro. So the move in other direction should support the common currency. Furthermore we still have the franc issue. Slowly climbing EUR/CHF gives also support to the EUR/USD through to indirect buying of the euro and selling of Swiss franc.

As a result we may witness a stronger correction. It may be a bit bumpy rise but levels around 1.17-1.18 are achievable in perspective of several days. This move may be event pushed forward if the US publishes weaker data (ADP and the ISM). However, the move significantly higher is much less probable. Stronger euro would be rather used to renew the short positions on the common currency.

Canadian dollar, Norway krone, and rouble boosted by crude oil rebound

When the oil was sliding the Canadian dollar or Norwegian krone were feeling some pressure. So it is not a surprise that commodity currencies are gaining some value with the Brent or WTI rebound. But after oil appreciation around 15-20% the currency effect is fairly muted and accounts for only 2-3% gain. On one side it can be explained that past slides were not so dramatic, but on the other it may be a hint that the energy hasn't bottomed yet and we are just witnessing a stronger correction.

Significantly stronger reaction is observed on the rouble. The Russian currency was strengthening around 10% at one moment comparing to the lows recorded just after the central bank unexpectedly lowered interest rates. The sharp reaction shows how Russian is depended on oil what moreover significantly increases the odds of further rouble slide if the Brent returns to its sliding trend.

The rouble in relation to the dollar and theBrent oil.

Wykres - RUB, ropa

Source: Bloomberg. The yellow line, the scale to the left, RUB/USD (reversed quoting to what is observed on the market. USD/RUB is in otder to show the relation to the crude oil price). The violet line is the Brent oil price in USD.

Foreign market in a few sentences.

The Greek subject should leave the headlines despite today's meetings with officials form the ECB and German finance minister. The EUR/USD should be more depended on the macro data. If both ADP and ISM fall short of expectations the EUR/USD may keep most of the gains recorded yesterday. However, for final result we will have to wait until “payrolls” are published. In case of NFP below 200k the EUR/USD may even finish the week above 1.1550.

Opinions beyond the consensus

Despite that 34 out of 36 economists surveyed by Bloomberg claim that the MPC leaves the interest rate unchanged there are some alternative scenarios on the market. A cut by 25 bps is predicted by Rabobank and Commerzbank. The German financial institution goes even further and expects that the MPC would signal another cut in March. As a consequence the EUR/PLN should return toward 4.30 according to Siomon Quijano Evans chef EM for Commeerzbank.

We, however, still claim that the MPC leaves rates unchanged what should keep the zloty stronger. Much more uncertainty is around the statement and the conference. The Committee probably opens the door to cuts in March, but it would be really interesting whether reporters get a hint if there is a real chance for a drop by 50 bps.

In a scenario of high probability of half percentage drop in March we may see a weaker zloty but still the EUR/PLN should hold below 4.20. On the other hand in case of a smaller easing the EUR/PLN should quickly move below 4.15.

Regarding the Swiss currency if the EUR/CHF remains around 1.06 it should “guarantee” the CHF/PLN to stay below 4.00. Additionally in case of less dovish MPC meeting and futher EUR/CHF appreciation at the end of the week may see even levels below 3.90.

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

Range EUR/USD 1.1250-1.1350 1.1150-1.1250 1.1350-1.1450
Range EUR/PLN 4.1600-4.2000 4.1600-4.2000 4.1600-4.2000
Range USD/PLN 3.6700-3.7100 3.6900-3.7300 3.6500-3.6900
Range CHF/PLN 3.9400-3.9800 3.9400-3.9800 3.9400-3.9800

Expected GBP/PLN levels according to the GBP/PLN rate:

Range GBP/USD 1.5050-1.5150 1.4950-1.5050 1.5150-1.5250
Range GBP/PLN 5.5300-5.5700 5.5100-5.5500 5.5500-5.5900


4 Feb 2015 12:49|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:

3 Feb 2015 17:28

Afternoon analysis 03.02.2015

3 Feb 2015 12:52

Daily analysis 03.02.2015

2 Feb 2015 17:21

Afternoon analysis 02.02.2015

2 Feb 2015 12:54

Daily analysis 02.02.2015

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