Daily analysis 30.11.2015

Consensus of economists surveyed by Reuters and Bloomberg before the Thursday's ECB meeting. Franc's wear off keeps the CHF/PLN below 4.00. The second GDP reading was better than initial GUS estimations. Unexpected modification of the budget for 2015.

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

• No planned macroeconomic data, which could have a significant impact on the analysed currency pairs.

Surveys before the ECB meeting

In previous daily analysis we have presented estimations from particular investment banks before the ECB meeting. However, due to the fact that the topic of monetary easing in the eurozone should be on the headlines during following days, it is also worth noting the consensus presented by information agencies.

The survey conducted by Reuters show that 80% of economists assumes that the monetary easing will be initiated this Thursday. Consensus assumes the ECB deposit rate to be decreased by 10 base case points, down to minus 0.3%. The survey also shows that Draghi is expected to announce an increase in the QE from 60 billion euros per month to 75 billion, and an extension of the QE operation beyond September 2016.

On the other hand, each of 53 economists surveyed by Bloomberg expect the ECB to increase the monetary stimulation on 3rd of December. 79% thinks that the QE will be extended beyond September 2016. 66% claims that the scale of assets will be increased, and will be more than 60 billion euros per month. Additionally, according to 49% of surveyed economists the ECB will extend the range of purchased assets.

Bloomberg also asked the question about inflation projections, which the ECB will publish in December. 83% of surveyed claims that it will be decreased for 2016. On the other hand, 71% assumes decreases also for 2017.

Considering the above studies and the economists statements, one can assume that investors expect an extension of the QE until March 2017, a decrease in deposit rate by 10 base case points, and an increase in quantitative easing by 15 billion. In general, however, along with a decrease in the EUR/USD the above values are to a greater degree included in rates.

Thus, it is possible that a decrease in deposit rate by 20 base case points and an increase in the QE operation by 20 billion, would be a strong enough signal from the ECB to take the EUR/USD below the level of 1.05. However, Friday's payrolls are also worth remembering. Economists' estimations assume an increase in jobs by 200k. If these expectations are crossed, there would be an appreciation pressure on the dollar, apart from a decrease pressure on the euro. This scenario does not exclude a depreciation of the EUR/USD below 1.04 at the end of the week.

Global weakness of the franc

On Friday there were some visible depreciations of the Swiss currencies on the global market. The EUR/CHF crossed the level of 1.09, and the USD/CHF increased to its 5-year-old maximums. It is difficult to say, whether these changes were a result of the SNB interventions, or a small liquidity related to limited activity of the American investors.

Due to franc's wear off on the global market, the CHF/PLN pair remains clearly below the level of 4.00. It is despite the general weakness of the zloty to basically every currency. However, it is worth noticing that if the SNB is able to respond the ECB's monetary easing in a sufficient enough way, a gradual appreciation of the CHF by few percent may occur. It could quickly take the franc above the limit of 4.000.

Few words about the foreign market

This week, apart from the ECB meeting, the market is waiting for the data from the American labour market, and Thursday's testimony of Janet Yellen in front of the Congress. However, it is possible that a bigger variability will appear already during the Tueasday's ISM readings, or Wednesday's data regarding employment from the ADP.

Good GDP data from Poland and modification in the budget

In the third quarter the Polish economy increased by 3.5% y/y. This result is by 0.1% higher than the first estimations from GUS. Contribution of particular components to the GDP also looks positive. Private and public consumption added 2.3%, investments 0.9%, and net export 0.4%.

On the other hand, a certain surprise was the modification of the budget for 2015, announced on Friday evening. Previously, it was assumed that only the project of the budget for next year will be changed, because it was written by the previous administration. According to the information from the Ministry of Finance website, “modification will increase the deficit by the sum of 3-4 billion PLN, but this amount will be specified on the basis of detailed data from the departments”. We should know more after 1st of December, when the changes will be presented to the Council of Ministers, and then the parliament.

The commotion regarding the budget did not translate to the wear off of the zloty for now. But the market is in general sensitive to information regarding changes in Poland's fiscal and monetary policy. Thus, apart from the global information, it is also worth following the national news.

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

Anticipated GBP/PLN levels according to the GBP/USD rate: