__cfduid
Valid: 29 days
It helps us protect the website from threats such as hacker attacks. Used by Cloudflare to recognise trusted network traffic.
__lc_cid
Valid: 3 years
Necessary for proper functioning of the chat available on the website.
__lc_cst
Valid: 3 years
Necessary for proper functioning of the chat available on the website.
rc::a
Valid: It does not expire
Cookies to correctly distinguish between human and bot-generated traffic.
rc::b
Valid: 1 session
Cookies to correctly distinguish between human and bot-generated traffic.
rc::c
Valid: 1 session
Cookies to correctly distinguish between human and bot-generated traffic.
NID
Valid: 6 months
Records a unique number to recognise the device you are using. It is used for advertising.
_ga
Valid: 2 years
Registers a unique user number to collect statistical data about how you use our website.
_gat
Valid: 1 day
Used by Google Analytics to reduce queries. Reduces the amount of statistical data collected.
_gid
Valid: 1 day
Registers a unique user number to collect statistical data about how you use our website.
yt-player-bandwidth
Valid: It does not expire
Determines the best video quality based on your device and the Internet connection used.
yt-player-headers-readable
Valid: It does not expire
Determines the best video quality based on your device and the Internet connection used.
The summary of all options which may be considered by the Fed's officials and its hypothetical impact on the market. Another step toward the Banking Union. The zloty will be slightly affected by the Fed's decision. No impact on the PLN is expected from industrial production reading.
Macro data (CET- Central European Time). Survey is supplied by Bloomberg unless otherwise noted.
FEd's scenarios. The Banking Union
In line with expectations the currency pairs with US dollars are waiting for the Federal Reserve decision. As a result the EUR/USD remains fairly stable around 1.3750. Much more volatility is expected around 20.00 CET when the Fed's statement is released.
After a surprising September Federal Reserve decision on keeping the QE at the full mode, the current expectations are pretty scattered. The market is evenly divided between the opinion that the Federal Reserve starts the tapering today or at the beginning of 2013. Therefore I would like to summarize all the possible scenarios for the Federal Reserve and evaluate the probability of each outcome.
1. Ben Bernanke and his colleagues leave the asset purchase at the current level and suggest that the FOMC waits for further economic improvement until it decides to start stalling back the asset purchase operation. It would be really dovish message to the markets which should keep a downward pressure on the dollar, push the yields on Treasuries lower and strengthen the EM currencies (including the Polish zloty). The probability of such result is around 20%.
2. The Fed leaves the QE at unchanged level, but clearly suggests that due to to improving economic conditions the taper will be announced at the incoming meetings. The probability is around 25%.
3. Slight taper (around 5-10 billion) is introduced. Additionally the forward guidance is modified and the Federal Reserve announces that the unemployment threshold in its forward guidance is lowered to 6% or even lower. It also introduces the interest rate floor claiming that the interest rates will not be risen until the PCE inflation increases above 1.5%. The probability of such development is around 15% and the market reaction will be firstly negative for the stocks or EM currencies, but later it should keep the dollar low and give some boost to the zloty or the EUR/USD.
4. The Fed decides to cut the asset purchase program by 5-10 billion but does not change the forward guidance. It only repeats a well known phrase that tapering is not tightening monetary conditions and the asset purchase will be set at each meeting. The message is bullish for the dollar and overall increases the risk aversion. The probability of such scenario is around 30%.
5. The remaining 10% is left for any mix of the mentioned above scenarios.
Summarizing the expectations for asset purchase reduction are evenly divided between today's date and the two next meetings. If the tapering starts this evening, the key will be any modification of the forward guidance or the dovishness of the Federal Reserve chairman. On the other hand if the FOMC decides to keep the QE at full scale than the similar discussion will be proceeded in January. Today the Fed will also announce its economic estimates for 2014 and beyond. According to the recent macro reports the inflation and unemployment should be revised downward and the GDP growth upward (rather positive for the dollar).
The zloty should remain fairly stable
The global currency market will be quite volatile during the evening hours. We are also expecting more nervousness on the zloty, but the EUR/PLN should not exceed its 4.16-4.20 range no matter what the scenario is announced. In case of tapering we can move toward 4.20, and if the Federal Reserve leaves the QE unchanged we should slide toward 4.16. The industrial production reading from Poland should have no impact on the zloty, especially that a few hours later we are having the results of Fed's meeting.
Summarizing the zloty will be more volatile after 20.00 CET, but no trend changes are expected. We should end the current week within 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:
Subscribe to our currency newsletter
See also:
Daily analysis 17.12.2013
Daily analysis 16.12.2013
Daily analysis 13.12.2013
Daily analysis 12.12.2013
Attractive exchange rates of 28 currencies
Live rates.
Update: 30s
Open your free account today
Save your time and money. Create an account for free and discover how much you can gain. Join us today, and start using attractive currency services.
Create free account