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Daily analysis 12.12.2013

12 Dec 2013 12:13|Marcin Lipka

Another approach for 1.3800 per EUR/USD. Former president of Central Bank of Israel has a chance to become the vice president of Federal Reserve. Goldman Sachs on last euro's strength. Zloty traditionally remains strong in relation to euro and has an appetite for the test of level 3.00 per dollar. Bratkowski on interest rates and growth of GPD.

Most important macro data (CET). Macro data estimations are based on Bloomberg's information, unless marked otherwise.

  • Apart from the market consensus, we will publish the expectations division for some macro data. It often happens that the market reaction is biggest when the macroeconomic reports are beyond extreme prognoses range.
  • 11.00 CET: industrial production from Euro Zone.
  • 14.30 CET: Weekly motions on unemployment benefits (estimations: 325 thousand; division 315-350 thousand).
  • 14.30 CET: retail sale from USA (estimations: +0.6%, division 0.2-1.4%; excluding cars and fuel: +0.2%, division between minus 0.3% to 0.7%).

In areas of 1.38. Ignorance. Strong euro

Yesterday we have exceeded the level of 1.3800 for a short time. Today morning we have repeated this task, but currently the rate has stabilized around 20 pips below this round boarder. Thursday is a bit richer in macroeconomic data, but none of them should not be crucial for EUR/USD behaviour till the end of this year.

The market once again ignores the positive informations for dollar. News from the information agencies on Stanley Fisher's nomination for Federal Reserve vice president should make “buck” strengthen. Former president of Central Bank of Israel spoke sceptically about forward guidance (I already wrote about it in the comment from September 25th https://cinkciarz.pl/nowosci/komentarze-walutowe/komentarz-walutowy-z-25-09-2013 ). According to „The Wall Street Journal” informations he stated that „We can not expect Fed to predict what it will do, because it simply does not know that. We do not know what will we do next year. Being too precise is a mistake (statement concerning the forced by Federal Reserve position, that interest rates will remain on the same level, until the unemployment will not fall below 6.5% and the inflation awaited in perspective of 1-2 years will not grow above 2,5% - author's footnote). Fischer also said that „if we (the central bank – author's footnote) give too much (precise – author's footnote) forward guidance, then we take away our flexibility. In the interview for Bloomberg television from October 11th, when asked by the journalist “When should Fed begin to walk away from amount loosening” Fisher answered: “there is an effective way of doing it – start potentially quick and do it step by step”. We should remember, that this interview was made after Fed extended QE, market's situation was uncertain, and the games between Democrats and Rebublicans were a danger for the economic growth in fourth quarter. Thus we can assume, that Fisher is more hawkish than Bernanke or Yellen.

Latest strength of European currency is a big surprise for many market participants. Apart from reasons often mentioned on the market – EBC's monetary policy vs Fed, excess on the current turnovers calculation or the return of capital on Euro Zone's money market (more on this http://finanse.wp.pl/kat,1033779,title,Euro-najsilniejsza-waluta-na-rynku,wid,16251429,wiadomosc.html?ticaid=111d3b&_ticrsn=3 ) we should also pay attention on opinion of Goldman Sachs's currency strategies chief, Thomas Stopler, which was published on MarketWatch website. He claims that „the european currency has a tendency to strengthen at the end of the year, although the last crisis year had cast a shadow on this trend”. Its reason is the fact, that the export companies protect their positions for next year. Goldman's strategist states: “if every exporter begins to hedge his exposition for next year at the end of current one, then we have a bigger demand for currency in country with a trading excess (that is the Euro Zone – author's footnote). It helps the euro”.

In conclusion, EUR/USD market once again ignored an information, that was negative for itself – hypothetical nomination of Stanley Fisher for Fed's president. Today's data, if they appear to be profitable for dollar, can overestimate the main currency pair and cause, that the test of last heights will move up for the next week.

Zloty is stable. Bratkowski on monetary policy and future GPD

Zloty is exactly in the middle of variety division in which it remains since few weeks (4.16-4.20). At the moment any greater changes can not be observed and there is a big possibility that we will remain at similar levels until the end of the year. In relation to the dollar there still is a chance to test the level of 3.00 down (in case of exiting of EUR/USD on new records and EUR/PLN going down to 4.16). A signal for both movements should come from the global market.

After a long period of unanimity in Monetary Policy Council, Andrzej Bratkowski revealed his dove face again, and in the interview for Reuters (quoted from www.obserwatorfiansowy.pl) he stated „In my opinion the most possible scenario predicts, that the increase of interest rates is most likely somewhere between the year 2014 and 2015”. It is also worthy to quote professor's statement on economic growth: “In years 2015-2016 we are entering the period of quite good business cycle. I am counting that about four percent (of GPD growth) will be possible at that time”. It is one of the most optimistic predictions on Polish economy lately.

In conclusion, zloty should be stable today and move in small division of fluctuation. It is worth to observe the balance of payment data and especially do we still have an excess on the sale trade.

Expected divisions of zloty pairs determined by EUR/USD rate:

EUR/USD rate 1.3650-1.3750 1.3750-1.3850 1.3550-1.3650
EUR/PLN rate 4.1600-4.2000 4.1600-4.2000 4.1600-4.2000
USD/PLN rate 3.0300-3.0700 3.0000-3.0400 3.0600-3.1000
CHF/PLN rate 3.3800-3.4200 3.3800-3.4200 3.3800-3.4200

Expected levels of GBP/PLN rate determined by GBP/USD:

GBP/USD rate 1.6250-1.6350 1.6350-1.6450 1.6150-1.6250
GBP/PLN rate 4.9700-5.0100 4.9900-5.0300 4.9500-4.9900

12 Dec 2013 12:13|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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