Daily analysis 30.12.2015

Yesterday's increase in appetite for risk caused a slight appreciation of the dollar, and a clear depreciation of the EUR/USD below the limit of 1.10. Will enforcement of the Swedish krona to the euro cause a reaction of the Riksbank? The zloty remains relatively stable and reacts on a change in global sentiment to a small degree.

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

• No macro data that could have a significant impact on the analysed currency pairs.

A better sentiment helped the dollar

Yesterday the main European stock market indexes increased by more than 1%. The floors in the United States also had a good session, and gained approximately 1% of value. During the whole American session better sentiment was also supported by a higher quotation of oil and macroeconomic publications from the USA.

The S&P CS real estates' prices index for the biggest American countries increased by 5.5%. This reading was coherent with expectations, and consumers' sentiments examined by the Conference Board reached the value of 96.5 points, and were higher than the Bloomberg's consensus (93.5 points).

A good condition of the capital market and a rebound on the raw materials market, caused the American economy to gain value, and depreciated the EUR/USD to the area of 1.0900. However, it is worth noticing that the likelihood of a clear depreciation of the main currency pair below 1.0900, is as small as a chance for a visible rebound above 1.10. A relative stabilisation and anticipation for the macro data planned for the first week of the new year, remains the base case scenario.

The Swedish krona is growing stronger

We are dealing with a more and more interesting situation on the Swedish krona. In the past days the EUR/SEK pair depreciated below the limit of 9.20. This means a visible enforcement of the Swedish currency, and a serious dilemma for the central bank. In the past quarters its main goal was to prevent appreciation of the SEK, in order to decrease the hazard of lower than planned inflation readings.

However, difficulties in maintaining a relatively stable rate of the krona to the euro are mainly a consequence of good macroeconomic publications. On its recent meeting held on December 15th, Riksbank visibly increased the perspective of the Swedish economy's growth for 2015 (from 3.3% y/y to 3.7% y/y), as well as for the following years (from 3.0% y/y to 3.6% y/y for 2016, and from 2.7% y/y to 2.9% y/y for 2017).

Recent readings from Sweden are also good. In November the unemployment rate decreased from 6.7% to 6.2%, while only a 0.1% reduction in comparison to the past month was expected. Indexes showing the consumers' condition are also better. The consumers' sentiment increased to 98.7 points, while the expectations were on the level of 95.6. On the other hand, retail sale increased by 5.2% y/y, with the consensus in limits of 4.0% y/y.

Even though it is theoretically difficult to expect interventions in order to wear off the currency by such good macroeconomic indexes, it is worth remembering that the Riksbank is highly sensitive to currency's appreciation, and quote an excerpt from the announcement from December 15th.

At that time the Swedish monetary authorities wrote that they are prepared to “perform even more expansive monetary policy, even between the planned meetings”. It also says that the interest rates may be decreased even more, and also it is possible that “the assets purchase will be increased”. The Riksbank also announced that it is ready to “intervene on the currency market, if an increase in inflation is endangered with a result of problematic market events”. Additionally, it was said that the central bank is ready to “introduce the program of loans for companies through the banking system”.

In the above paragraph we can see a strong determination of the monetary authorities from Stockholm, and also a warning that a more serious appreciation on the SEK will probably lead to an intervention on the currency market. This is why we think that a further depreciation on the EUR/SEK and testing the level of 9.00, is significantly more likely than a return to a range higher than 9.20.

Few words about the foreign market

Keeping close to the current results is still the base case scenario for the EUR/USD. The market will probably wait for the macro data planned for the next week. Especially interesting are the publications regarding the American labour market. Payrolls should either increase a chance for hikes in the United States, or cause doubts whether the monetary tightening cycle presented by the Fed in December is possible to perform.

Remaining in the limits of the last volatility

Yesterday, the zloty gained approximately 0.01-0.015 PLN to the main currencies, on the wave of an improvement in the global sentiment. On the other hand, the CHF/PLN tested the area of 3.90. Today, the majority of this movement is corrected along with depreciations on the European stock markets, and worse perspective of floors' opening in the United States.

However, no significant changes on the national currency are expected by the end of the year. The only thing that may cause them, are the comments from the candidates for the Monetary Policy Council members. If it appears that two more representatives of the Council are against cutting interest rates, the zloty may gain approximately 0.2-0.3 PLN. That is of course, if we consider the current level as the base case.

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

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