Daily analysis 24.12.2013

Closing the day above the boarder of 1.3700 on EUR/USD did not happen. Hawkish Fisher wanted 20 billion of tapering. Inflation of PCE is still low and should still weigh on dollar. The chances of EUR/PLN descending in boarders of 4.10 – 4.20 until the end of the year are getting bigger. President Komorowski critically on Open Pension Fund.

Most important macro data (CET). Estimations for macro data 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 macroeconomic reports are beyond the range of extreme predictions.
• 14.30 CET: New orders for constant goods from USA (+1.5% m/m ; predictions division between minus 0.5% to 4.0%).

Below 1.37. Fisher. Inflation

Yesterday we had a few attempts on exiting above the 1.37 on EUR/USD boarder, but none of them succeeded. The obstacle in achieving the higher levels on main currency pair, could be the statement of Richard Fisher. President of Fed's regional department in Dallas said on Fox Business television (http://video.foxbusiness.com/v/2965956365001/federal-reserve-bank-of-dallas-president-i-argued-for-20b/ ), that he was a supporter of deeper cutting of amount loosening (by 20 billion USD). Despite that Fisher is considered by one of the most declared hawks, this statement could be a surprise for many. Also in 2014 Fisher will have a right to vote and his views can cause faster tightening of monetary policy at some moment. The market came to a similar conclusion (already during the Asian session) and evaluated this fact in EUR/USD rate, causing about 20 pips recede from the boarder of 1.3700.

In Monday's comment I paid attention PCE publications on inflation. Data presented by the United States Department of Commerce were mostly negative for dollar. Inflation change was 0.0% and was in lower division of market consensus (0.0% do 0.2%). Also year to year index is still far from the level marked by Fed (2.0%), and is on 0.9% level. If we will look on inflation's components (http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi1113.pdf - second part of number 9 chart and number 11 chart) we cannot observe any signals of inflation at the moment, and the deflation tendencies of constant goods are even being consolidated. Very low inflation will be all the time the main argument preventing the Federal Reserve from more decisive tightening of monetary policy.

In conclusion, until the end of current week the chances for decisive changes on EUR/USD are small (of course if no unplanned informations will appear). It should be more interesting in the last two days of this year (Monday and Tuesday). In this period more sudden movements are possible and it is not excluded, that euro-dollar bulls will want to seal this year's victory and attack the 1.3800 level again.

Chances for successful test. Komorowski on Open Pension Fund

National currency shows a clear will of effective attack on lower variety division from the last few weeks. Currently we are testing the boarder a bit below 4.16 by which our rate was stopping in September, October and November. If this craft would be accomplished, then the probability of finishing the year even in boarders of 4.1000, would grow significantly. Lower market smoothness between holidays can be used to make such attack.

In yesterday's show „Tomasz Lis na żywo” on channel two of TVP president Komorowski stated critically on the Open Pension Fund reform (http://vod.tvp.pl/audycje/publicystyka/tomasz-lis-na-zywo/wideo/23122013/13201397 - the questions about the retirement reform are asked in the very beginning of the show). Analyzing Komorowski's words, one can even come to conclusion that the president announces the will of directing the regulation to the Constitutional Tribunal “I would rather, and I will express it, that I would not be given a doubtful solution (referring to both, constitutionality and anti-reform character of the project – author's footnote). I would rather, that someone would think earlier; someone, who is responsible for public finances, so the government, for putting in movement such reforms, that would make these finances more secure” (quoted by IAR). Going a bit firther though, if the Tribunal will take care of this matter and give an advantageous verdict, then the both sides – the president and the government, will be victorious. Considering prime minister's and his ministers confidence in this matter, and multiple underlining the possession of positive legal opinions concerning changes in Open Pension Fund, such situation development seems to be most likely. Realization of this scenario will be neutral form PLN.

In conclusion, zloty is clearly trying to disturb the strong support on the level of 4.15-4.16 per euro. If this craft can be accomplished, then the movement towards the 4.10-4.12 will be very probable. It would also pull the descends in other pairs - CHF/PLN in direction of 3.35, GBP/PLN in boarders of 4.90, and USD/PLN even below 3.00.

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

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