Daily analysis 09.01.2014

The EUR/USD has still been moving around 1.36 level. A significant reduction of trade deficit in the US. Today the market will focus on the ADP report and Fed's “minutes”, but investors will make more bold decisions after Friday's NFP. The zloty stabilizes around 4.18 before the MPC meeting.

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.
• Between 12.00 CET and 14.00 CET: Polish MPC announces rate decision.
• 14.15 CET: ADP report from the USD (survey 200k).
• 16.00 CET: Polish MPC statement and Marek Belka press conference.
• 20.00 CET: The Federal Reserve publishes the discussion from recent Fed's meeting (minutes).

Still around 1.36. US trade narrows. The ADP and minutes

The EUR/USD has been pretty stable in the recent hours and is currently traded around 1.3600 level. Today investors will be waiting for the ADP report and Fed's minutes but the key economic events are scheduled for tomorrow – ECB rate decision and for Friday. In yesterday's data it is worth to focus on US traded balance. The deficit shrunk significantly in November and was the lowest in four years. From the US Bureau of Economic Analysis report we can conclude that the export has been steady rising and import fell quite substantially (http://www.census.gov/foreign-trade/Press-Release/current_press_release/ft900.pdf ). We can also see that lower demand for oil from abroad (due to increased production at home) caused that the value of imported oil dropped by 40 billion USD in the 11 months ended in November. Despite that the States generate around 500 billion USD traded deficit a reduction of around 10% is pretty important and, if sustained, it can bring some support to the US dollar.

Today investors should focus on two reports – the ADP and Fed's minutes. Economists surveyed by Bloomberg estimate that ADP National Employment Report will show that the economy added around 200k new jobs. The reading around the consensus should be neutral for the market, but if the data exceeds the expectations more than 30k or falls short of projection by the same amount we can expected around 50 pips reaction on the EUR/USD. The move can be larger than usually, because the correlation between the ADP and NFP data rose substantially in the recent months and therefore the private agency report can be a good projection for the government data. Moving to the evening's FOMC minutes market participants will be looking for some hints on several topics. Firstly how broad was the support for the December tapering and what kind of obstacles were mentioned by the Participants. Secondly, it is crucial whether the 10 billion USD asset purchase reduction is a solid base case scenario and what events discussed by the Members can change that course. Finally investors will try to find out whether there was an extended discussion on “forward guidance” modification, and if “well past the time” option was the only one. Traditionally move dovish stance should push the dollar lower or many hawkish statements may give the “greenback” a boost.

Summarizing, despite that the ADP data and “minutes” are important, investors will be waiting for the crucial NFP report to decide whether to extend the sliding tendency or generate a stronger rebound on the EUR/USD.

Lower volatility

According to the recent MPC statements and a broad consensus inside the Committee (doves and hawks have a similar views) there will be no change regarding the interest rates either today or in the following months. Moreover, the resignation of professor Zyta Gilowska (a supporter for more restrictive policy), and a nomination for professor Osiatynski who seems support the dovish camp of the Committee (especially after a statement released by Polish Press Agency where he says that “in the current condition the monetary policy should not harm the economy and maintaining the current interest rate level is desirable for as long as possible”). In result the first rate hike can be moved toward 4Q of 2014.

Regarding the global events the zloty should be under EUR/USD influence (the upside move on the most traded currency pair should support the PLN) and the condition of US equity market. However, in line with the broad market, the key data for the PLN will the Thursday's ECB meeting and Friday's NFP (still I don't expect that we can leave the 4.16-4.20 range).

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

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