Daily analysis 22.06.2016

The last surveys before tomorrow's referendum will set the sentiment in the afternoon, as well as the evening. Yellen was cautious and Draghi was neutral in their testimonies from yesterday. Due to a relatively positive market sentiment, the euro is slightly below the 4.40 level before noon.

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

• 16.00: Janet Yellen's testimony in the American Chamber of Representatives.
• 16.00: Sale of houses in the American secondary market (estimations: 560k).

Surveys and bookies' quotations

Considering the fact that we are ahead of the year event in the currency market tomorrow, its participants seem quite relaxed. Moreover, they estimate the risk of Brexit to a smaller degree.

However, our suggestions from the past few days have partly confirmed yesterday. They stated that even if Brexit occurs, the survey results may be surprising. The phone survey made by the Survation/Igcom, only showed a 1% advantage for the EU supporters. The reaction of the pound was visible (approximately 50 pbs decrease), but it was temporary. The zloty wore-off by more than 0.03 PLN against the euro as well. However, this depreciation was also decreased rather quickly.

The element that sustains the optimism, is the fact that investors are probably not paying much attention to the bookies quotations. Currently, they are dependent on surveys to a minor degree, and most of all they seem a result of incoming bets. The bets, on the other hand, are assuming, basically in their entirety (even 95% - the Ladbrokes data from Monday), the failure of Brexit. As a result, we can observe a rather self-perpetuating optimism. Despite that even if Brexit is not the base case scenario, the risk remains quite significant. However, this risk is estimated to a surprisingly minor degree.

The optimism can, however, fade away quite quickly. Especially considering that surveys show mixed results one day before the referendum. According to the official announcement from Opinium, it will publish an online survey today, at approximately 17.30 CET. If it shows at least a 2-3% advantage for the Brexit supporters, the anxieties may return. Moreover, the amount of optimists can suddenly decrease, and this will probably deteriorate the market sentiment significantly.

Reuters wrote that we should expect the results of the phone survey by ComRes for the ITV television, as well as for the Daily Mail today. We can expect them to appear later this evening. However, this information is not yet confirmed. Additionally, it is possible that we will see the results of other surveys that have not been previously announced.

A draw in the phone survey, as well as a small victory of the Brexit supporters in the online survey, are sufficient enough to change the investors attitude. This is quite possible, even if the EU supporters eventually win. This was shown by the few past days, as well as the referendum in Scotland two years ago.

Yellen and Draghi

It does not happen often, but the testimonies of two chairs of the world's main central banks (Fed and ECB) have overlapped yesterday. Janet Yellen's testimony in the American Senate was more interesting regarding the future monetary policy. However, it did not bring many new facts.

The Fed chairwoman sounded quite cautious, just as she did during the summary of the recent Federal Reserve meeting. She took note of the worse payrolls readings, the danger of Brexit, and the low productivity of the American economy. On the other hand, we could hear the arguments that the weakness of the labor market may only be a temporary disturbance. Moreover, if we assume the base case scenario, the matter of Brexit will probably not be discussed anymore in July.

Thus, with both of the above dangers gone, it is possible that the topic of the hikes will be back on the table quite quickly. This is even considering that the Fed is cautious currently. On the other hand, Maro Draghi's testimony in the European Parliament was rather neutral. The ECB chairman was focusing on what has been done, as well as what effects has it brought, rather than additional elements of the Monetary Policy that may appear in the future.

A few words about the currency market

A quite relaxed attitude of investors may seem surprising. Especially considering that the forthcoming surveys may cause a sudden nervousness, as well as a significant overvalue of instruments that are dependent on the British pound. Even if eventually the United Kingdom remains within the European Union, the quotations can change significantly in the next few hours.

Volatile zloty

The yesterday EUR/PLN increase by more than 0.03 PLN was only determined by the Survation/Igcom survey. This goes to show, to what degree is the Polish currency sensitive to the matters related to the British referendum. Regarding this, it is worth remembering of at least two new surveys (more details in the above paragraphs) that may significantly impact the PLN quotations.

Moreover, we need to keep in mind that the risk remains unbalanced. If Brexit occurs, we may see the EUR/PLN, as well as the CHF/PLN, at the level of 4.60 and 4.40, respectively. On the other hand, if the United Kingdom remains within the European Union, depreciation of the main currencies will probably be limited, and it will close itself within the range of 0.05-0.07 PLN.