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Daily analysis 08.12.2015

8 Dec 2015 12:52|Marcin Lipka

Mixed data from China might increase the risk aversion in the coming days. Lockhart optimistic on the US economy. Commodities currencies under pressure from oil slump. The zloty weakens in line with the forint. Swiss franc around 4.00.

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

  • No major economic data that might affect analysed pairs.

Chinese uncertainty

There is some uncertainty regarding reports from China. According to the official data the foreign reserves dropped from 3.52 billion USD to 3.43 billion USD in November while economists surveyed by Bloomberg expected a fall toward 3.49 billion.

The drop might be partly explained by the significant appreciation of the dollar last month. The value of all assets are presented in the USD while reserves in other currencies were valued less if converted to the US currency. However, more economic data didn't give a simple answer to the Chinese situation.

Export in RMB dropped 3.7% y/y (survey minus 2.9% y/y) while import slided by 5.6% (survey minus 11.3% y/y) in November. On one hand larger export drop and lower trade surplus can be worrisome, but on the other it shows that internal demand picked up and measures implemented by Beijing regarding monetary or fiscal policy have started working.

It is also worth noting that in the recent days the RMB have been slowly weakening. Today the USD/CNY is quoted around 6.41 and the rate is getting close to the highs recorded in mid August when fears on Chinese economic conditions, further RMB devaluation and capital outflow created significant global risk aversion.

Lockhart bullish on the US economy

“I am ready for decision to lift off” the interest rates Dennis Lockhart told “The Wall Street Journal” yesterday. The Atlanta Fed's president who is close to the FOMC consensus claimed also that conditions set by the Federal Reserves to determine when to raise the benchmark “have been substantially met”. This message can be regarded as bullish for the US currency.

However, comments for the CNBC were not really supporting the “greenback”. The Fed's member said that he sees “more of a gradual path” of hikes after the first happens. For Lockhart “gradual” means “not every meeting”. This phrase might be quite widely interpreted but he also added to “watch the dots” which is included in quarterly projections of the Federal Reserve. It will be also publishes in mid November.

Commodity currencies under pressure

Yesterday we noted a possible pressure on both Canadian and Russian currencies. Comparing to the midday rate the USD/CAD rose more than 100 pips and the levels around 1.3550 were tested today. It means that the CAD is the weakest to the USD since more than 11 years.

A negative reaction is also observed on the Russian rouble. Today the USD/RUB was close to the 70 mark while on Friday the dollar was worth 67.5 rouble and at the beginning of November the greenback was worth even less then 63. High level of volatility can be observed also in the following days as the oil is expected to find some support after the OPEC decision on Friday.

The foreign market in few sentences

The base case scenario for the EUR/USD is still trading around 1.08. No significant macroeconomic data should support this idea. However, if fears regarding China bring more attention and the risk aversion increase on the market the pair should be pushed hihger.

The zloty remains weak

No significant changes are observed on the zloty. The EUR/PLN remains weak and is approaching 4.33 levels while CHF/PLN is closer to 4.00 mark. This time the Polish currency fall is caused by global issues partly pushed by slight risk averse regarding situation in China.

Also in the long run the PLN remains weak and is around 2-3% below the forint valutaion taking into the account the average rate in previous months. It is mainly the result from uncertainties regarding future fiscal and monetary policy in Poland. Until both issues settle the leading currencies will probably remain higher by around 10-zloty cents.

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

Range EUR/USD 1.0550-1.0650 1.0650-1.0750 1.0450-1.0550
Range EUR/PLN 4.2600-4.3000 4.2600-4.3000 4.2600-4.3000
Range USD/PLN 4.0000-4,0400 3.9600-4.0000 4.0400-4.0800
Range CHF/PLN 1.4950-1.5050 1.4850-1.4950 1.5050-1.5150

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

Range GBP/USD 1.4950-1.5050 1.4850-1.4950 1.5050-1.5150
Kurs GBP/PLN 6.0400-6.0800 6.0000-6.0400 6.0800-6.1200

8 Dec 2015 12:52|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:

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