Daily analysis 06.12.2013

Elevated volatility during the afternoon session. Less dovish than expected Draghi strengthened the European currency. Non-farm payrolls data from the US. The zloty gained around a quarter of one percent to the euro and in case of a weak US data the move can be extended by another 0.01-0.02 PLN.

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.
• 12.00 CET: Factory orders from Germany (survey: minus 0.1%).
• 14.30 CET: US data (NFP: expectations around 180k, range between 140-200k), private payrolls: 173k and the range is between 145-200k; Unemployment rate at 7.2%, range between 7.0%-7.3%.

Draghi and payrolls

On Firday afternoon we had quite a volatility on major currency pairs. The EUR/USD firstly dropped to around 1.3550, but after a short time we bounced back to 1.3670. The first move was caused by better than expected (at last the headline one) GDP reading. However, according to “The Wall Street Journal” analysis “Business Stockpiling Fuels 3.6% Growth Pace” a significant portion of the growth came for a “big bump in business inventories” which account for 1.7% percentage point of the expansion. The “WSJ” also writes that “Advisers expects the economy to advance at 1.4% rate in the fourth quarter. Other economists say the pace could fall below 1%”. No questions were asked about the jobless claims reading. The data fell under 300k last week and it was one of the strongest weekly report since many months (not taking into the account the readings when the data was disturbed by some technical problems in a few States). On the wave of solid economic reports from the US the dollar gain some value, but just after Mario Draghi started his conference the move was revised. The ECB chief was much less dovish than expected. Moreover the economic projections were only slightly updated (the 2014 inflation decreased by 0.2% and the growth was even upgraded by 0.1% in the following year). The Central Bank president was cautious on any unconventional monetary policy. Regarding asset purchase operation, he said “Ah the ECB should buy assets” I say: Which assets?”. He also responded to LTRO issues, saying that currently he would rather see that the Central Bank money would be transferred to the real economy rather than to banks which are buying government bonds. Draghi was cautious also on negative deposit rate claiming that: “We had brief discussion about negative deposit rates, but it was brief”. He repeated at least few times that the discussion was brief. The element which supported the euro was that the last meeting decision on interest rate had been voted and “we rarely vote” Draghi said. So if the Committee wasn't unanimous on the cut, it is a small chance that it can make much more controversial decision like negative interest rate or asset purchase programme.

Today, we finally have the news of the month – NFP reading. The strong ADP data fueled expectations that the job's publication would be stron, so the data close to the market consensus can be pretty disappointing. However, if we breach 200k and there will be no revision from two previous months, the EUR/USD will be under presser. Additionally investors will also sell the treasuries which can push yields even toward 2.9%. It can also depress the prices on Polish bonds.

The zloty is slightly stronger

The Polish zloty, despite global turmoil, was stable. It strengthened slightly but it was rather a result of overall better EM currencies performance than particularly PLN bulishness. Today we have one of a few days in December that can move the zloty. Traditionally, better than expected reading from the States push the zloty lower, but 4.21 per the euro should not be exceeded. On the other hand if we get poor job result from the States the EUR/PLN can fall further, but it will rather not break the 4.16 support.

Summarizing, after 14.30 CET we should observer a higher volatility, but there is a low probability that EUR/PLN can move beyond 4.16-4.21 range.

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

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