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Daily analysis 07.04.2014

7 Apr 2014 11:59|Marcin Lipka

No reaction on the EUR/USD after slightly better data from the US jobs market. Rumors on asset purchase tests by ECB denied by the Bank's vice president. Interesting “minutes” on Friday. The zloty is moving sideways. On Wednesday the MPC meeting results.

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

  • No major economic data which can significantly affect the analyzed pairs.

Payrolls. ECB. Minutes

Let's say it at the beginning. The BLS data published on Friday was not ground breaking. The US economy created 192k jobs in March which was basically in line with the Bloomberg median estimated (200k). A positive message came from two previous months where revisions added +37k. On the other hand, the unemployment level remained at 6.7%, whereas economists expected a drop to 6.6. But if we look to the data further we can see that participation rate increased to 63.2% (around 500k returned to the labor force and majority found the job) which can be a bright signal that more workers may be eager to start looking for a job. The last figure is positive but another important indicator on the jobs market health – wages – remained unchanged on the m/m basis (estimates were at +0.2% m/m). Overall, the data was mixed/neutral so the impact for the FX was fairly muted. Most economists were probably right that the slowdown at the beginning of the year was a result of colder winter, but there is also no indication of very robust economy on the horizon (no need to change the monetary policy measures).

Quite chaotic moves on the EUR/USD during the payrolls publication were not only caused by the US data. At the same time Frankfurter Allgemeine Zeitung (quotes from Reuters) hit the wires. The FAZ claims (according to its sources at the ECB) that the bank has run some QE test and the results showed between +0.2% to +0.8% inflation spike when 1 trillion (80 billion per month) asset purchase is run. The message was quickly denied by ECB vice chair Vitor Constancio who said that he has not heard about such tests. In the same the on CNBC he also talked about the QE and claimed that the QE was discussed by no details are set (similar message to Thursday's Draghi comments). Despite that each news on hypothetical QE in the Euro Zone brings some attention, it seems there is too much news on the subject and no clarity on the real further moves. ECB is well known from preventing the Euro Zone collapse only thanks to Draghi “whatever it takes”, but now investors are looking for more actions and are not really eager to sell the euro on rumors.

The macro calendar is pretty empty in the following days, but it is worth to remember about the ones which are due on Wednesday. The FOMC protocol can show whether members really discussed on earlier than anticipated interest rate hike or the famous “6 months” from Yellen was just a slip of a tongue. If there is a clear indication that the Fed seriously considers monetary tightening in the first half of 2015 than we can expect some dollar strength.

Today, we should have pretty calm session. There are some ECB and FOMC members speeches/statements expected but none of them should be really significant. The level of “noise” in the market is too high (especially regarding the ECB) to spur a groundbreaking reaction.

Still pretty stable

The zloty is slightly lower today, but the move is within its recent trade range and was initiated by some correction on lira, ruble and forint. Most trades on the EUR/PLN pair should be processed within 4.17 plus/minus 0.01 PLN.

One of the interesting events this week regarding the Polish market should be the result of the MPC meeting. Investors are concerned whether the recent professor Osiatynski comments on leaving the interest rates unchanged till the end of 2015 have some support in the Committee. If that was the case it is possible that the zloty can weaken up to 0.5%.

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

Range EUR/USD 1.3750-1.3850 1.3850-1.3950 1.3650-1.3750
Range EUR/PLN 4.1600-4.2000 4.1600-4.2000 4.1600-4.2000
Range USD/PLN 3.0100-3.0500 2.9900-3.0300 3.0400-3.0800
Range CHF/PLN 3.4000-3.4400 3.4000-3.4400 3.4000-3.4400

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

Range GBP/USD 1.6550-1.6650 1.6650-1.6750 1.6450-1.6550
Range GBP/PLN 5.0300-5.0700 5.0500-5.0900 5.0100-5.0500

7 Apr 2014 11:59|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:

4 Apr 2014 12:03

Daily analysis 04.04.2014

3 Apr 2014 11:47

Daily analysis 03.04.2014

2 Apr 2014 11:49

Daily analysis 02.04.2014

1 Apr 2014 11:55

Daily analysis 01.04.2014

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