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Daily analysis 06.08.2015

6 Aug 2015 13:06|Marcin Lipka

The market's nervousness will probably be resolved after the official data about the jobs market hits the wire. Solid readings from Germany. The franc is significantly weaker to the euro and the dollar. The zloty's weakness is partly due to global sentiment towards EM currencies and partly to local turmoil.

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

  • 14.30: Jobless claims from the US (survey: 272k).

Payrolls in focus

The market behaviour since Tuesday evening has shown that investors are quite nervous. Yesterday we analysed how the FX market might have overreacted to the Lockhart comments. A similarly strong reaction was observed after a weaker ADP report and later after the solid ISM reading.

But around midday the EUR/USD stabilized around 1.09. It is probably a good starting point before tomorrow's payrolls from the Labour Department. The jobs data should set the mood for the coming week or even to the next “minutes” publication from the last Fed meeting.

The economists surveyed by Bloomberg expect that the non-farm payrolls are set to rise around 225k. Additionally, the Bureau of Labour Statistics is scheduled to publish unemployment rate and wage changes.

Investors should mainly focus on the “payrolls”. The publication below 200k combined with the downward revision by at least 30k would cause a significant dollar slide which may even exceed 150 pips.

On the other hand, if the Labour Department rejects fairly weak ADP data and we get the reading (combined with the revision) which exceeds expectations by more than 50k, the market may be strongly convinced to the idea that the interest rate hikes can begin in September and push the EUR/USD to the lower range of 1.07.

Solid data from Germany

Getting back to our continent, it is worth pointing out the German factory orders. Readings on the month-on-month basis are characterized by high volatility but if we look at the y/y publication, they look relatively solid. The orders growth increased to 7.2% y/y which is the third best figure since mid-2011. The trend also looks encouraging.

It is also interesting that according to the German statistics office “Destatis”, the domestic orders dropped m/m but both the eurozone orders and “other countries” recorded solid gains at 2.3% and 6.3% respectively. It might show that the condition of the euro area is improving and the lower value of the euro additionally improves the competitiveness of our western neighbour. It is also solid news for our economy.

The franc gets weaker

The Swiss franc does not look weaker to the zloty but the CHF is softer both to the euro and the dollar. Today, the first time in almost half a year, the EUR/CHF rose above 1.07 and the USD/CHF is approaching 1.00.

There is no direct reason behind the recent franc weakness. It is possible, however, that some progress on talks between the creditors and Greece is regarded as a negative message for the safe haven currency. Additionally, for the money market participants the dollar can become more and more luring due to the interest rate difference and the safeness of the Swiss currency finally starting to become overvalued.

The foreign market in a few sentences

The recent hours brought some volatility to the currency market. Investors, however, are focussing on tomorrow's “payrolls” data. If it turns out that the reading differs more than 50k from the consensus, a move around 150 pips could even be seen.

The zloty remains weak

Investors demand higher yields on EM bonds before the expected interest rate raise in the US. It is the main reason for capital outflow from developing countries. A similar situation is observed in Poland and some market turmoil caused the zloty to lose value not only to the dollar but also to the euro.

Today, around a quarter of a percent of the zloty weakness can be contributed to the significant slide in financial sector equities. As a result the EUR/PLN is slowly approaching the 4.20 range. Currently, however, there is a slim chance that this line can be crossed even in a scenario of solid “payrolls”. But in the case of the good Labour Department report the dollar may top the 3.90 range.

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

Range EUR/USD 1.0850-1.0950 1.0750-1.0850 1.0950-1.1050
Range EUR/PLN 4.1600-4.2000 4.1600-4.2000 4.1600-4.2000
Range USD/PLN 3.8200-3.8600 3.8600-3.9000 3.7800-3.8200
Range CHF/PLN 3.9000-3.9400 3.9000-3.9400 3.9000-3.9400

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

Range GBP/USD 1.5550-1.5650 1.5450-1.5550 1.5650-1.5750
Range GBP/PLN 5.9800-6.0200 5.9600-6.0000 6.0200-6.0600

6 Aug 2015 13:06|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:

5 Aug 2015 17:29

Afternoon analysis 05.08.2015

5 Aug 2015 12:49

Daily analysis 05.08.2015

4 Aug 2015 17:21

Afternoon analysis 04.08.2015

4 Aug 2015 12:46

Daily analysis 04.08.2015

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