The weak retail sales data causing some fears to currency fund managers who are still long US dollar. The Russian Central Bank has started buying foreign currencies to boost the reserves and halt the rouble appreciation. Tomorrow important data from Poland which may boost the PLN if the global market remains calm.
Macro data (CET- Central European Time). Survey is supplied by Bloomberg unless otherwise noted.
14.00 CET: Inflation from Poland (+0.2% m/m and minus 1.2% y/y).
14.30 CET: US weekly jobless claims (survey: 273k).
Tomorrow at 10.00 CET: GDP from Poland (survey: +3.3% y/y and +0.8% q/q).
Weak readings from the US
The dollar significantly lost value after weaker than expected data from the US. The retail sales excluding more volatile items like food and cars rose only 0.2% m/m while economists' expectations were around 0.6% m/m. Despite a slight upward revision of the data for March, US consumer aren't eager to spend more money.
Additionally, yesterday the inventories' data were published. According to JPMorgan and Barclays, which were quoted by The Wall Street Journal, it would cause the Q1 downward revision for the US GDP. Moreover, the growth in the first three months might also be pushed lower by trade data which were not available during the “advanced” estimate. As a result JP Morgan claims that the US economy contracted by 1.0% on the annualized basis in the Q1.
Taking into account the retail sales, JPMorgan estimates that the growth in Q2 might be only 2%. It is much less than the result observed in the Q2 of 2014 where the weather also played a significant role in winter months. This time the rebound looks much less impressive.
Regarding the fact that the US economy still looks fragile there is the question about whether the Fed decides to hike interest rates in September. Currently, the base case scenario seems to be unchanged but if the economy disappoints further we should expect the market to start speculating on a December increase. It would be a negative message for the dollar which might push the EUR/USD above 1.15.
The CBR does not want strong rouble
Today the Russian Central Bank (CBR) announced that it was starting to purchase foreign currency to the amount of 100-200 million USD. The first goal for the MPC is to rebuild FX reserves which were reduced by more than 100 billion USD during the most severe part of the crisis.
Another goal for the CBR is to curb the rouble appreciation. The USD/RUB slide below 50 would mean less revenue from exporting energy related products in the case when the Brent is still 40% lower in dollar terms than a year ago and the budget is calculated in rouble terms.
The CBR decision causes further rouble appreciation to be less probable than hovering around the current levels. Only a significant increase of the Brent might push the RUB higher without the counter reaction from the central bank. As a result the base case scenario for USD/RUB is to remain around 50.
Foreign markets in a few sentences
The market should still focus on the macro data from the US. If the weekly jobless claims fail to surprise market participants we should wait for both the industrial production data and consumer confidence readings which are scheduled for tomorrow. A weaker publication may push the US currency lower and give some additional boost to the EUR/USD which could rise above 1.1500.
Before the GDP and current account data
The zloty still fears pain from chaotic fixed income moves. Additionally, a significant euro appreciation on the broader market causes some troubles for the PLN to gain value against the European currency.
However, if the global sentiment remains favourable tomorrow we can expect some PLN strength at the end of the week. There is a high probability that the GDP might be significantly higher than the consensus predicts (+3.3%) y/y due to record high trade surplus. A similar positive surprise might come from the current account data which may record also a record surplus.
The culmination of positive data should boost the local currency by around 1-2 zloty cent. However, if it turns out that the data is close to the consensus we might end the week closer to 4.10 on the EUR/PLN and slightly below 3.95 on the Swiss franc.
Anticipated levels of PLN according to the EUR/USD rate:
Range EUR/USD
1.1250-1.1350
1.1150-1.1250
1.1350-1.1450
Range EUR/PLN
4.0800-4.1200
4.0800-4.1200
4.0800-4.1200
Range USD/PLN
3.6000-3.6400
3.6300-3.6700
3.5700-3.6100
Range CHF/PLN
3.9000-3.9400
3.9000-3.9400
3.9000-3.9400
Anticipated GBP/PLN levels according to the GBP/USD rate:
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.
The weak retail sales data causing some fears to currency fund managers who are still long US dollar. The Russian Central Bank has started buying foreign currencies to boost the reserves and halt the rouble appreciation. Tomorrow important data from Poland which may boost the PLN if the global market remains calm.
Macro data (CET- Central European Time). Survey is supplied by Bloomberg unless otherwise noted.
Weak readings from the US
The dollar significantly lost value after weaker than expected data from the US. The retail sales excluding more volatile items like food and cars rose only 0.2% m/m while economists' expectations were around 0.6% m/m. Despite a slight upward revision of the data for March, US consumer aren't eager to spend more money.
Additionally, yesterday the inventories' data were published. According to JPMorgan and Barclays, which were quoted by The Wall Street Journal, it would cause the Q1 downward revision for the US GDP. Moreover, the growth in the first three months might also be pushed lower by trade data which were not available during the “advanced” estimate. As a result JP Morgan claims that the US economy contracted by 1.0% on the annualized basis in the Q1.
Taking into account the retail sales, JPMorgan estimates that the growth in Q2 might be only 2%. It is much less than the result observed in the Q2 of 2014 where the weather also played a significant role in winter months. This time the rebound looks much less impressive.
Regarding the fact that the US economy still looks fragile there is the question about whether the Fed decides to hike interest rates in September. Currently, the base case scenario seems to be unchanged but if the economy disappoints further we should expect the market to start speculating on a December increase. It would be a negative message for the dollar which might push the EUR/USD above 1.15.
The CBR does not want strong rouble
Today the Russian Central Bank (CBR) announced that it was starting to purchase foreign currency to the amount of 100-200 million USD. The first goal for the MPC is to rebuild FX reserves which were reduced by more than 100 billion USD during the most severe part of the crisis.
Another goal for the CBR is to curb the rouble appreciation. The USD/RUB slide below 50 would mean less revenue from exporting energy related products in the case when the Brent is still 40% lower in dollar terms than a year ago and the budget is calculated in rouble terms.
The CBR decision causes further rouble appreciation to be less probable than hovering around the current levels. Only a significant increase of the Brent might push the RUB higher without the counter reaction from the central bank. As a result the base case scenario for USD/RUB is to remain around 50.
Foreign markets in a few sentences
The market should still focus on the macro data from the US. If the weekly jobless claims fail to surprise market participants we should wait for both the industrial production data and consumer confidence readings which are scheduled for tomorrow. A weaker publication may push the US currency lower and give some additional boost to the EUR/USD which could rise above 1.1500.
Before the GDP and current account data
The zloty still fears pain from chaotic fixed income moves. Additionally, a significant euro appreciation on the broader market causes some troubles for the PLN to gain value against the European currency.
However, if the global sentiment remains favourable tomorrow we can expect some PLN strength at the end of the week. There is a high probability that the GDP might be significantly higher than the consensus predicts (+3.3%) y/y due to record high trade surplus. A similar positive surprise might come from the current account data which may record also a record surplus.
The culmination of positive data should boost the local currency by around 1-2 zloty cent. However, if it turns out that the data is close to the consensus we might end the week closer to 4.10 on the EUR/PLN and slightly below 3.95 on the Swiss franc.
Anticipated levels of PLN according to the EUR/USD rate:
Anticipated GBP/PLN levels according to the GBP/USD rate:
See also:
Afternoon analysis 13.05.2015
Daily analysis 13.05.2015
Afternoon analysis 12.05.2015
Daily analysis 12.05.2015
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