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Daily analysis 09.09.2015

9 Sept 2015 13:18|Marcin Lipka

The main economist of the World Bank, discourages the United States from increasing interest rates. Irrespective of recommendations from the WB, the chance for a change in the American monetary policy in September remains slim. The zloty takes advantage of the improvement in the global sentiment.

Most important macro data (CET – Central European Time). Estimations of macro data are based on Bloomberg information, unless marked otherwise.

  • No macro data that could have a significant impact on the analysed currencies.

World Bank against the hikes in the USA

In June and in July the International Monetary Fund (IMF) appealed to the Federal Reserve for abandoning the plan to increase interest rates in 2015. At that time, the IMF economists claimed there is too much uncertainty regarding inflation, employment and an increase in salaries on the other side of the ocean. Thus, it is better to wait with the monetary tightening. It is likely to deteriorate the conditions of financing for the local enterprises. It can also continue to enforce the dollar, which will have a negative impact on American export.

Above that, today's interview with the main economist of the World Bank contained arguments concerning the emerging markets. It is mostly their situation that speaks for keeping the interest rates on the current level. Kaushik Basu told the Financial Times that by performing the hikes in September, the Federal Reserve risks causing “panic and commotion”. In his opinion the Fed should wait for the calming down of the global situation.

The representative of the World Bank emphasized that any kind of monetary tightening will cause more risk-sensitive capital to abandon the emerging markets and a commotion in their currencies. This on the other hand will lead to an enforcement of the American dollar and have a negative impact on the increase in the United States.

Of course, one interview is not able to change the attitude of the Federal Reserve representatives regarding September's decisions. However, considering the relatively big sensitivity of the American central bank for the market events and recent comments from John Williams for The Wall Street Journal, an increase in interest rates in September is very unlikely. This should not be changed by even a few increase sessions on New York's stock market before next week's meeting of the Fed.

The monetary market also shows a relatively slight likelihood of an increase being performed this month. According to the calculations of Bloomberg agency, the chance for the tightening in September is 30%. On the other hand, a possibility of raising the interest rates in October or December, is respectively 42.6% and 59.8%.

Some investors continue to speculate that the Fed can wait with the hikes until 2016. However, there is a small chance for such a scenario coming true. The FOMC consensus suggests an increase this year for many months. It is reasonable, considering the situation of the American economy, and excluding the global impact of this decision.

We sustain our opinion that after the first monetary tightening, there will be even a six-month-long break in further increases in interest rates. If the market believes that the hikes cycle will be extremely calm, a more serious correction on the dollar can be observed.

Few words about the foreign market

Participants of the EUR/USD are influenced by two opposite powers. An improvement in the situation on the global shares market, encourages to activate carry trade on the euro, which should wear off the common currency. On the other hand, better readings of the GDP from the eurozone are related to a slight chance for hikes in the USA and encourage buying the main currency pair. For the time being, the appetite for the EUR/USD has a slight advantage. However, the upwards movement can be limited, especially if the coming sessions in the USA will be as good as yesterday.

The zloty takes advantage from the good sentiment

The Polish currency takes advantage of an improvement in the global sentiment of the capital markets. Its main indicator is the behaviour of the stock markets indexes on the other side of the ocean. Before noon, the EUR/PLN went to the area of 4.21.

In contrast to the depreciation of the euro-zloty caused by the dovish signals from the EBC, this movement should continue for a longer time. A change of sentiment on shares should not reverse that quickly. Especially that today the pessimists were quite brutally punished in Tokyo, where a record amount of short positions needed to be closed in a hurry. This caused an increase in Nikkei by more than 7%.

The situation on the CHF/PLN continues to be positive. Due to the general appreciation of the zloty, the franc remains close to the level of 3.85, despite a big correction and a depreciation of the EUR/CHF below 1.09. The Swiss currency below the limit of 3.90 continues to be the base case scenario.

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

Range EUR/USD 1.1150-1.1250 1.1250-1.1350 1.1050-1.1150
Range EUR/PLN 4.2100-4.2500 4.2200-4.2600 4.2000-4.2400
Range USD/PLN 3.7500-3.7900 3.7200-3.7600 3.7900-3.8300
Range CHF/PLN 3.8500-3.8900 3.8500-3.8900 3.8500-3.8900

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

Range GBP/USD 1.5350-1.5450 1.5250-1.5350 1.5450-1.5550
Range GBP/PLN 5.7800-5.8200 5.7600-5.8000 5.8000-5.8400

9 Sept 2015 13:18|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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Afternoon analysis 08.09.2015

8 Sept 2015 13:33

Daily analysis 08.09.2015

7 Sept 2015 17:13

Afternoon analysis 08.09.2015

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Daily analysis 07.09.2015

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