Daily analysis 05.12.2014

Verification of expectations before the ECB summit, caused a bounce on EUR/USD. New records of yen's weakness and pre-election surveys in Japan. Putin speaks and central bank intervenes – the rouble is stronger at the opening. Today we will know the data from the American labour market. After ECB summit, zloty lost minimally, but currently the situation is stabilizing in the areas of 4.16 per euro.

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

• 14.30 CET: New jobs in non-agricultural sector (survey: +230k); unemployment (survey: 5.8%, without changes); increase of salaries in year to year relation (survey: +2.1%). Index of participation on labour market (previously 62.8%, increase will be a positive signal on the labor market).

Euro zone. Japan. Russia. USA

In yesterday's analysis we have suggested, that the market clearly overran the future events, and evaluated the perspective of a clear signal from ECB about introducing QE to a great degree. A part of the investors assumed, that the monetary authorities from Frankfurt will decide for introducing the purchase of treasury bonds, already on Thursday. However, it did not happen and those who predicted the widening of monetary stimulation, began to reduce their positions against euro quite quickly. It caused a sudden fall on EUR/USD.

Of course it does not mean, that ECB withdraws from its recent suggestions. Mario Draghi confirmed, that a wide review of situations and evaluation of influence of recently introduced instruments, will occur in first quarter. It is also then, when we can expect a decision about “full QE”.

The situation on the oil market are also treated by ECB in an interesting way. Of course the European representatives of monetary authorities do notice the positive aspects of lower prices of energetic resources. But they also fear the negative influence on inflation and certainly in a greater degree than e.g. their American colleagues. This fact may be used at the beginning of next year as a good argument, that will push the Board of Governors to increase the choice of assets purchased by the Bank.

ECB has also quite clearly cut the prognoses for upcoming two years. The economic increase in 2015 will amount +1.0% (previously 1.6%), and the inflation +0.7% (previously 1.1%). In 2016 only a small improvement is assumed, and the economy is supposed to increase by 1.5% (previous forecasts: +1.9%). The expected growth of prices will amount only 1.3% (+1.4% was assumed in September). However, Draghi underlined that the models still do not take the influence of lower evaluation of fuels into consideration.

So in general we can state that the monetary authorities of the euro zone will act according to the plan created within recent weeks. Decision about increasing QE, can be made either on January or March summit. Theoretically the modified ECB calendar (there will be only 8 summits starting next year) should cause some more determined actions. But it is not excluded, that increasing the period of making the decision will be a hand out to the German members of Board of Governors, and we will observe the full QE in euro zone not sooner, than within three months.

The USD/JPY pair has finally broken through the level of 120. Breaking another round limit is often an impulse, to generate some new prognoses. Nomura Bank claims that the dollar will be worth 125 yens at the end of next year. It is not the most aggressive projection. According to expectations quoted by Bloomberg agency, Amundi Asset Management, which manages the means worthy 1 trillion USD, the level 125 on dollar-yen pair, can be reached already this year.

Currently the matter of next week's elections is the main topic on Tokyo market. According to the surveys conducted by few Japanese newspapers (Nikkei, Asahi, Yomiuri Sankei, Mainichi) the party of prime minister Abe should obtain approximately 300 out of 480 places in the lower chamber of parliament. That is actually the same amount as in the elections in year 2012. This means, that the currently reigning prime minister and his coalition partner, will be able to rule up until year 2018. Additionally, the greater victory of current government, the bigger mandate for further fiscal stimulation. Thus, it should lead in a straight line to maintenance of pressure on yen.

Thursday's vivid speech of Russian president, made it quickly to the headlines of general media. We have marked already yesterday that Putin will warn the speculators against further frustration of the rouble's rate. Today it appears, that on Tuesday the central bank sold 1.9 billion USD. Probably in the morning the monetary authorities, have also decided to sell more currencies, because the rate of rouble has been enforced by almost 3% in relation to the currencies' basket.

However, Kremlin's strategy concerning the currency will still remain unaltered. If the rouble's depreciation will be crossing the percentage drop of the oil prices, the central bank should intervene. The actions will also be made in case of too significant frustration of the market. On the other hand, if the oil would begin to generate a more serious correction, a greater intervention should occur, and it would “punish” the speculators on the one hand, and on the other lead the rate closer to the level of balance. But one should not expect, that the monetary authorities will try to stabilize the rate in case of oil's return to a strong decrease trend.

Publication of data from the American labor market will be a main event on today's session. Economists' estimations concerning the amount of new working places in the non-agricultural sector, are in the limits of 230 thousand. However, considering the ADP reading, weekly applications for unemployed and employment sub-indexes published recently overtaking indexes, it may be difficult to achieve such a result. Thus, the reading that will not be much above the consensus (including the reviews), should be taken well by the dollar market and cause a faster return of EUR/USD to the recent minimums. On the other hand, publication below 200 thousand is a chance to continue the correction and going above 1.2400.

Relatively calm

We could observe a slight nervousness and a short exit of EUR/PLN rate above the limit of 4.16, in the first reactions of national currency right after ECB decisions. However, the situation stabilized later, and we have returned to the previous range of variability. So we can see, that the element of “earlier QE” in the euro zone, helped the national currency only to a small degree. It also means, that if the local data will not suggest another wave of slowdown, and give the dovish members of ECB arguments for the discussion about the decrease of the interest rates, zloty should gain value slowly, or at least remain close to the current levels.

Afternoon's data from the American labor market, should have a very limited influence on euro or franc. We may observe some bigger fluctuations on the American dollar, however also in this case the levels recorded in recent days, will probably not be crossed. The basis scenario for the upcoming hours and the beginning of next week is the stabilization of EUR/PLN and CHF/PLN in the limits of, respectively 4.15-4.17 and 3.45-3.47.

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

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