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Daily analysis 21.03.2013

21 Mar 2013 10:01|Marcin Lipka

Relative calm reaction on the FED data. Better-then-expected data form China. There is still no valid resolution regarding Cyprus. The pound despite quite high volatility after “Minutes” hit the wires and the chancellor budget presentation ended the day close to the opening levels. The zloty is weaker despite strong bond auction and another record high levels on U.S equities.

Macro data (CET- Central European Time). Survey is supplied by Bloomberg unless otherwise noted:

  • 8.58 CET: preliminary manufacturing PMI from France (survey 44.2)
  • 8.58 CET: preliminary services PMI from France (survey 44.0)
  • 9.28 CET: preliminary manufacturing PMI from Germany (survey 50.5)
  • 9.28 CET: preliminary services PMI from Germany (survey 55.5)
  • 9.58 CET: preliminary manufacturing PMI from Euro Zone (survey 48.2)
  • 9.58 CET: preliminary services PMI from Euro Zone (survey 48.2)
  • 10.30 CET: retail sales from the U.K. exluding auto fuel (survey +0.6% m/m and 1.2% y/y)
  • 13.30 CET: Initial jobless claims form the States (survey 330k)
  • 15.00 CET: Existing home sales in the States (survey 5.00M)

Bernanke will continue QE. Good Chinese PMI. Data from Europe.

Long anticipated data from the FED was mainly in line with the previous analysts' expectations. The GDP economic projection growth was revised down slightly (previously between 2.3%-3.0%, now at 2.3%-2.8%), while unemployment estimates was reduced from 7.4%-7.7% to 7.3%-7.5% and the inflation is expected to be at 1.3%-1.7% vs the December forecast. The outcome form the economic expectations should be neutral for the dollar. FOMC still claims that “unemployment rate remains elevated” and plans to continue its asset purchase at 85 billion USD per month. Bernanke team wants to keep the benchmark rate at 0.00%-0.25% and even if the unemployment drops to 6.5% it will not mean that the rates automatically rise (negative for the dollar). The Federal Reserve message was nicely summarized by Michael Hanson former FED economist (currently with Bank of America). He claims that “though the FED is little more optimistic about the labor market, it sounded like they are not very close to a substantial improvement necessary for cutting the purchase. Michael Dueker, chief economist at Russell Investments and a former economist at the St. Louis FED told Bloomberg that “they might cut the purchase of mortgage backed securities byt the fourth quarter this year, and perhaps Treasury purchase by early part o next year” The EUR/USD was pretty stable during the FED event. In the following day we can see a slight weakness of the dollar (especially in case of better info from Europe or regarding the Cyprus case). It is also worth to note the better-then-expected PMI data from China (51.7 vs survey at 51.2). Optimists should be happy especially concerning the export orders http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10856 . On the other hand I would not expect any positive surprises from today's PMI reports (especially the overall Euro Zone report), and even if we get a bit better data the Cyprus case (where except other controversial ideas like using retirement funds, banks or gas fields selling to Russians) should level off any stronger rises.

BoE and Osborne without surprises.

The March minutes didn't surprise the markets this time. Only 3 out of 9 governors voted for more easing (the same amount as in February). Less reformative was also the chancellor of exchequer budget presentation. George Osborne reassured that the Bank of England will maintain its inflation target at 2% but will have more room to exceed the limit when stronger growth is needed. Analysts expect that after the June BoE chief change the Central Bank will be more aggressive. The pound will focus on the macro data and on the possible rating cut by Fitch and S&P (some of the impact already priced in).

The zloty is weaker.

The zloty was weaker yesterday despite another record high Dow Jones levels and quite successful Polish bond auction (2 and 5-year yields at record low). EUR/PLN rose to around 4.1800. There was no major event regading the Polish currency weakness other then the unresolved situation in Cyprus. It is possible that we can see 4.2000 at the end of the weak. Investors should also keep in mind the Friday's industrial production report (lower then expected should speed up the weakening and better then forecasted can pause the zloty depreciation).

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

EUR/USD 1.2950-1.3050 1.3050-1.3150 1.2850-1.2950
EUR/PLN 4.1500-4.1900 4.1500-4.1900 4.1500-4.1900
USD/PLN 3.1900-3.2300 3.1700-3.2100 3.2100-3.2500
CHF/PLN 3.3900-3.4300 3.3800-3.4200 3.3900-3.4300

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

GBP/USD 1.5050-1.5150 1.5150-1.5250 1.4950-1.5050
GBP/PLN 4.8300-4.8700 4.8500-4.8900 4.8100-4.8500

Technical analysis EUR/USD: after reaching the EUR/USD bearish target (1.2850) we have to wait for the additional signals to evaluate whether the current move higher is only a correction in a sliding trend or a chance to some more significant upside tendency. After falling under 1.2850 we can expect the move toward 1.2700. On the other hand moving upside above 1.3100 should generate the buy signal with a target at 1.3250-1.3300.


Technical analysis EUR/PLN: we are getting closer to generate a buy signal (above 4.18-4.19) with the target at 4.2300 (50% Fibonacci retracement level).


Technical analysis USD/PLN: the base case scenario is still a move toward 3.27 (50% Fibonacci retracement level and November highs) breaking earlier 3.22 (200 DMA and 38.2% Fibonacci retracement level).


Technical analysis CHF/PLN: we moved toward the highs of range trade (around 3.41). The breakout should result in move toward 3.48. For now, however, the consolidation (3.33-3.41) is still more probable then the breakout .


Technical analysis GBP/PLN: staying close to the highs of the correction target (4.8700) is in favor of the bulls. If we don't fall under the resistance level there is an increasing chance that 4.9000 can be breached. On the other hand if 4.87-4.90 will hold then the continuation of the bearish trend in the medium-term is highly possible.


21 Mar 2013 10:01|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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