Daily analysis 27.11.2014

Slightly worse data from USA again do not allow appreciation of the dollar. ECB vice-chief sketches the scenario of QE in the euro zone. Russian rouble is again close to the records of weakness, after 4-years minimums were deepened because of oil. Results of MPC voting in October – Hausner already then voted against a deeper cutting. Zloty remains in the limits of 4.18 per euro.

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

• 16.00 CET: Press conference after OPEC summit. However, some leaks about the decision may appear earlier.

Worse data. ECB. Rouble

During the Wednesday's afternoon, the EUR/USD market again became a beneficiary of slightly worse data from the USA. The negative surprises were most of all jobless claims (return above 300k for the first time since many weeks), and also the PMI from Chicago. In case of second of these indexes, a number in limits of 60 is historically still a very good result and it should not be considered as an element of slowdown in Chicago region. However, expectations were by few points higher.

The PCE inflation (a measurement of prices variation, on base of which Federal Reserve makes its decisions) maintained on the level of +1.4% y/y and this reading was coherent with estimations. However, other data from Department of Commerce Bureau of Economical Analyses have once again given a signal to sell the dollar. They were amongst others, consumers' expenses and incomes, which were increasing slower than expected. Thus, despite another doveish comments from ECB, EUR/USD again tested the limits of 1.2500.

On yesterday's bank conference organized by “Financial Times”, vice-president of the euro zone monetary authorities, clarified the doubts concerning hypothetical moment of starting the treasury bonds purchase by the Bank. While discussing the elements of Union of Banks, Vitor Constancio mentioned about the instruments of monetary stimulation, that have been used by ECB.

However, if they would not convert into increase of the bank's balance and inflation expectations in the euro zone, the monetary authorities will estimate the situation and if it will appear unsatisfactory, ECB “will have to consider purchasing other assets, including the treasury bonds available on secondary market”. Constancio also claimed, that such actions are coherent with Bank's mandate.

In this case, the market will currently observe what is the tempo of balance increasing by ECB and how will the current and future inflation develop. In relation to economic growth, these will be the information that will either cause introduction of QE (probably at soonest at the end of first quarter of 2015), or decide, that the purchase of national debt will be postponed in time.

The rouble's quotations in November remind of a behaviour of the banana republic's currency. At the beginning of the month, the rouble lost nearly 15 per cent. After that we had a few days of consolidation, to see the abolition of almost a half of the weakning. Three last days were another sale of RUB and reaching the historical records of weakness.

The speculation capital, which took over the Russian currency, will apparently not let go, despite a proper reaction of central bank. The behaviour of the oil prices will currently be the main catalyst of changes on the rouble. If the OPEC decisions will cause its further falls (below 70 USD on Brent), we can easily not only observe the crossing of recent records of weakness, but even an approach to the limit of 50 RUB per dollar (currently it is 47.5; and at the beginning of this year it was 33).

In conclusion, due to lack of session in USA, the market will be waiting today mainly for decisions of OPEC. If they would appear to be negative for evaluation of oil, we can observe a further, intense overestimation of not only the rouble, but also e.g. the Norwegian krone, which will deepen over 5-year old records of weakness in relation to the euro, and it will be moving towards 11-year old peaks on USD/NOK pair.

Chairman's vote appeared to be decisive

According to the information published by the Court and Economic Monitor, the October's decision about cutting the interest rates, was held by the division of votes 5:5. In such case, it is the chairman's opinion which is decisive. Belka, Bartkowski, Chojna-Duch, Osiatynska and Zielinska-Glebocka, voted for the half percentage cutting. Against it, apart from the declared hawks, was Hausner.

This also means, that it was Chojna-Duch, who “broke out” from the voting for cutting in November. Additionally, we can also claim, that in the light of current data the MPC representative will not change her mind in December (it would not be logical), and probably also in January. Thus the division of opinions in MPC increases the chances for maintenance of money rates on the current level for at least two upcoming summits.

This afternoon we should expect a smaller variability on zloty. Since morning we slightly correct the recent enforcement, however EUR/PLN and CHF/PLN should not exit above the limits of, respectively 4.18 and 3.48.

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

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