Daily analysis 05.12.2013

The EUR/USD comes back above 1.3600 despite mixed macro reports and yield rise on US treasuries. The ECB meeting and data from the States will shape the markets today. No new news from Polish MPC meeting and governor Belka conference.

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

• Besides the market consensus we are also publishing the consensus range. It gives more info how economists predict the incoming data and what kind of impact can be generated from surprising reports.
• 13.45 CET: ECB rate decision (survey: 0.25%; no change).
• 14.30 CET: Mario Draghi conference.
• 14.30 CET: Weekly jobless claims firm the US (survey: 322k, range between 315-345k).
• 14.30 CET: Second GDP reading form the US (survey: +3.1% (annualized); range between 2.4%-3.6%).
• 16.00 CET: Factory orders from the US (survey: minus 1.2%; range between minus 1.8% to +0.5%).

Too fast too high. The ECB and the US

Looking at the EUR/USD in the recent hours it is honest to say that we moved quite high without any valid reason or even with no reason. From three economic reports published on Wednesday, the most important, in the current situation, was ADP reading. The private job growth exceeded 200k and was above the economists' estimates (215k vs 185k). The most heavily traded currency pair slided by around 70 pips to 1.3530 after the employment reading. The reaction was in line with the market sentiment – better eco data from the US strengthens the dollar, but the final move will be made on Friday after the “payrollls”. Later we had the ISM reading and new home sales from the States. Both figures were worse than expected (but not dire). Firstly the market interpretation was in line with the readings, but an hour later (around 17.00 CET), the EUR/USD jumped by around 50 pips and finished the day around 1.3600. The move ingnored the overall sentiment, especially that at the same time US 10-year treasuries were at almost 3-moth high at 2.84%. The FI should have a better “feeling” about the incoming Fed's tapering and is a better indicator of future monetary policy. As if that was not enough in early morning we moved around 1.3640 (which was probably a result from USD/CHF slide under 0.9000). To keep the current level of the EUR/USD the NFP on Friday will have to really disappointing Currently such scenario is not really probably so the EUR/USD slide should be the base case scenario on Friday.

Today we have another set of data from the US – GDP, factory orders and jobless claims. Economists estimate that GDP growth in 3rd quarter should increase by around 3% (a clear contrast to the European economy which is just slightly above the breakeven). However, for the EUR/USD a crucial message is the ECB meeting today. There are three options on the table (as I wrote on Monday) – another LTRO, negative deposit rate and asset purchase program. None of this ideas are supposed to be implemented today, but Mario Draghi approach toward this unconventional policies can either push the EUR/USD lower and take off the burden of the incoming monetary action.

Summarizing, the EUR/USD rose too much at not favorable conditions and against other markets (especially the US treasuries). There is an increasing chance that it can be disappointing after Friday's job's data and elevated probability of Fed's tapering in December.

Optimistic on the economy. No answer to interesting questions

In line with expectations the Polish MPC meeting didn't bring any news to the market. Marek Belka and his fellows confirmed that the interest rates will remain at current level at least till the end of the 1st half of 2014. The NBP chief was also quite optimistic on the future Polish growth citing the recent solid GDP reading and its components – rise of investments and the consumption.

An interesting question was asked by TVN CNBC reporter Dominik Cierpioł. He asked the MPC members about the recent ECB rate cut, currency intervention at Czech Central Bank and the legislature process (very quick) of polish pension reform. However, the answer was transferred to MPC member Ph.D. Andrzej Rzońca who actually didn't elaborate to any of the subjects.

Summarizing, the zloty should remain at the current level to the euro. On the other hand the USD/PLN should be more volatile, especially during Mario Draghi conference and in line with the EUR/USD moves.

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

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