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Daily analysis 09.06.2014

9 Jun 2014 12:32|Marcin Lipka

Stable on EUR/USD after the data from the American labor market. QE very unlikely in the Euro Zone. The Bank of Mexico cuts the money rates. A wave of Monetary Policy Council members' statements after the recent speculations about the upcoming cutting. Zloty remains close to the level of 4.10 per Euro.

Most important macro data (CET). Estimations of macro data are based on Bloomberg's informations, unless marked otherwise.

  • No macro data that could significantly influence on analysed currency pairs.

Payrolls. Constancio. Cutting in Mexico

The most awaited data of the month from the other side of the ocean did not bring a clear increase of variability on the currency market. The main reason of investors' calm reaction on American labor department's publication, was the fact, that the report was close to consensus. American economy created 217k jobs (survey were in limits of 213k), and review of data for previous two months was symbolic (6k). The unemployment rate was quite better than the expectations – it maintained on the level of 6.3%, and its increase by 0.1 per cent was expected. However, by record low index of participation (the amount of working people and people searching for a job to those being in working age) on the level of 62.8%, the unemployment reading can be found as neutral.

Economists' comments after Thursday's decisions of European Central Bank can still be heard. The interview with Vitor Constancio, EBC vice-chairman, casts a little more light on further moves of bank's Board of Governors. When CNBC journalist cleverly asked, is the Bank “bluffing with a possibility of introducing QE”, Constancio replied, that the assets purchase is a certain option, but it would be probably introduced in a “very extreme” situation and “we all hope that we do not even have to consider such scenario”. It seems that this “medium bazooka” presented by Mario Draghi last week and based on cutting the deposit rate below zero, maintenance of SMP program sterilisation and introduction of credits dedicated to small and medium companies, is according to EBC enough to stimulate the inflation and economic growth in the Euro Zone. Vice-president's comment is also less dovish than the suggestions coming from Draghi, who rather leaves an open door for QE (mainly to wear off Euro – author's tnote), than closes them (statement of vice-president).

Central Bank of Mexico made an interesting move. On Friday it surprisingly cut the interest rates by 50 basis points to a record low level of 3.0%. Bloomberg's consensus assumed, that the value of money will remain on an unchanged level of 3.5%. One of the reasons for cutting interest rates, could be the projections of economic growth for current year from the division between 3%-4% to 2.3%-3.3%, revised already on May 21st. In his comment to this decision, Goldman Sachs economist Alberto Ramos, quoted by “The Wall Street Journal” claimed, that “this courageous decision could have been caused by the fact of smaller anxieties” of the risk involved with the possibility of capital's withdrawal from the local currency and assets denominated in peso. Additionally, it is worth noticing that although the situation in Mexico differs from the situation in Poland, the global investors often compare these two markets and we can also find some reasons for decrease of the money value on our market (although the statements of MPC members, do not confirm this concept at the moment).

In conclusion, slightly less dovish comments of Vitor Constancio can decrease the descent appetite of EUR/USD. This week is also poor in macroeconomic publications, so it is not excluded, that we will again (as before the EBC summit) enter the side trend on the main currency pair. In the long run there are still much more arguments speaking for the decrease of euro-dollar.


During the weekend four comments about the future of the national monetary policy appeared. On a Sunday, president Belka who is currently in Amman, in his statement for Bloomberg said that despite the decisions undertaken by EBC and observed zloty's strengthening“it is nothing that could complicate our lives”. He also emphasized that though the probability of cutting interest rates in Poland is not zero, “it is not our base case scenario”.

Another MPC member, Jan Winiecki, also spoke in a similar tone (when it comes to the perspective of interest rates). Also interviewed by Bloomberg he claimed, that not excluding the decrease does not mean “describing a probability of such movement”. The catalyst could be the increase of GDP, which would be lower than estimations.

The opinion of professor Zielińska-Głębocka is close to the views of Winnicki and Belka. In her interview for Polish Press Agency she said that the argument for the decrease “would be a clear slowdown of economic growth tempo”.

Adam Glapiński on the other hand, approaches this topic slightly differently. This MPC member in his interview for Polish Press Agency declared that “the increase is weak, that is why I assume, that we will lower the interest rates in 2015”. Glapiński's statement is another confirmation of castling in the camp of doves and hawks, that was in force during the cycle of recent decreases.

In conclusion, after the comments of Council's members, the probability of cutting the interest rates in July is very small. The chances for money rates' decrease on the first summits after holidays is also small, although MPC will surely follow the economic data with attention (mainly the inflation and growth perspectives). The views presented by the members should also not impede zloty's appreciation trend (after previous conference it was probable). Today due to the lack of macro data and stable situation on the markets of debt instruments, we should be in the limits of 4.10 on EUR/PLN and 3.00-3.01 on USD/PLN. Franc on that matter will cost nearly 3.36.

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

Range EUR/USD 1.3650-1.3750 1.3550-1.3650 1.3750-1.3850
Range EUR/PLN 4.1000-4.1400 4.0800-4.1200 4.1200-4.1600
Range USD/PLN 2.9800-3.0200 3.0000-3.0400 3.0000-3.0400
Range CHF/PLN 3.3600-3.4000 3.3400-3.3800 3.3800-3.4200

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

Range GBP/USD 1.6750-1.6850 1.6850-1.6950 1.6650-1.6750
Range GBP/PLN 5.0500-5.0900 5.0700-5.1100 5.0300-5.0700

9 Jun 2014 12:32|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.

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