Daily analysis 28.11.2013

We are still around 1.3600 level on the EUR/USD. The “Financial Times” puts the recent rouble weakness into the perspective. The EUR/PLN is slightly above 4.20. Steep rises on polish government yields.

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

• Besides the market consensus we are also publishing the consensus range. It gives more info how economists predict the incoming data and what kind of impact can be generated from surprising reports.
• No major macroeconomic data.

The readings and Russian rouble

Generally the US data yesterday was quite solid. The jobless claims dropped to 316k (survey 330k), Chicago PMI significantly exceeded expectations (63 points vs 60.5 consensus and higher range at 65.5), and the University of Michigan index rose to 75.1 points (survey 73). The only disappointment was the durable goods sales where the reading (excluding transportation) dropped to minus 0.1% m/m with the estimates at +0.4%. However, the data from previous month was revised upward by 0.4 percentage point and therefore levelled of a negative impact of the most recent report. Overall the macroeconomic readings should bring the Federal Reserve closer to the December tapering and consequently put some pressure on the EUR/USD. But it was only the case shortly after the data was published. The most traded currency pair dropped by 40 pips and then remain stable during the Asian session. At the beginning of the European day the EUR/USD returned to 1.3600 what confirmed that the recent bullish bias is still strong.

The “Financial Times” published today an article about Russian currency “Rouble hit by stagnant growth and lower oil revenues”. The author points out that the dollar-euro basket (55% US dollar and 45% the euro) rose to 38.36 level – the weakest rouble in the last 4 years. However, despite the recent depreciation, Citigroup strategist Luis Costa claims that even if the sliding oil price sheds the current account surplus by half the central bank intention to float the rouble will remain intact (currently the central bank keeps the currency within 32.4-39.8 dollar-euro basket; after 2015 the rouble should be freely traded). If we look at simple macroeconomic statistics there is no evidence that the local currency can significantly depreciate in value or repeat the 90s crisis. The Central Bank has $500 billion in reserves, current account surplus is at 5% GDP and debt-to-GDP is under 10%.

Summarizing the macro data calendar is empty today. The market will be enjoy low volatility, especially during the US session (Thanksgiving day). However, from Monday we should observe more active trading during the payrolls week.

Slightly higher on the EUR/PLN. Debt market

The EUR/PLN was traded above 4.20 most of the day. The zloty's weakness should not be persistent but a move toward 4.22-4.23 is still possible. Polish currency wasn't able to take advantage from EUR/USD rise, record high US stocks or a quiet trading on treasuries. So in case of sentiment deterioration the PLN can depreciate by around 1% to its major partners.

A surprising signal came today from the local debt market. The yields on 10-year government bonds jumped by 15 bps to 4.6%. It can be an answer why the zloty was under pressure in the recent days. It could mean that some investors are trying to reduce their positions before the jobs report (in case of strong NFP the tapering will bring quite a volatility on the EM debt market) and the FOMC meeting in mid December.

The zloty should remain close to the 4.2000 level but there is an increasing probability that we can move toward 4.22-4.23 on the EUR/PLN pair till the end of the week.

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

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