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Daily analysis 31.08.2015

31 Aug 2015 13:22|Marcin Lipka

Statements from the Fed representatives for the media appear to be more significant than the testimonies of the central bankers during the meeting in Jackson Hole. Support for Tsipras in Greece decreases. The euro-zloty should remain in a relatively small range of fluctuations. Tomorrow we will know the PMI from Poland.

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

  • 15.45: The PMI from Chicago for August (estimations: 54.5).
  • Tomorrow at 9.00: The PMI index from the Polish industry (estimations: 54.2).

Jackson Hole was important, but not crucial

The official testimonies of central bankers regarding inflation did not bring much vigor to the market. Representatives of the monetary authorities from the USA and Europe, suggested that an increase in consumer prices should return to the mid-term target, which is approximately 2 percent. Stanley Fisher's testimony, which was the most significant, was prepared very carefully, so that it does not reveal the moment of hikes on the other side of the ocean.

According to us, statements of the particular members of the Fed for the media were much more significant. Especially the interviews with Stanley Fisher for CNBC and Dennis Lockhart for Bloomberg television. The words of the Federal Reserve vice chairman, as well as the chairman of the American central bank's department from Atlanta, can bring the following conclusions.

First of all, both of them treat the recent events in Asia very seriously and are willing to observe the further development of the situation. The hypothetical impact of the Chinese slowdown should not change their approach to the national monetary policy. The monetary tightening will probably begin this year.

Second of all, which is relatively strange, the Fed representatives still suggest that the upcoming macroeconomic data will be significant for the approaching decisions. However, can the few closest readings (from this and next week) change the decision, which should be a cumulation of the improvement in the American economy in the recent years, and be a prognosis for the forthcoming quarters? Probably not, but this may be a good reason for explaining the decisions. The recent data was very good.

Finally, once again we received a confirmation for the concept that after the first hike there might be a long period of break in undertaking other decisions. It was visible especially in Fisher's interview for the CNBC. The vice chairman of the Fed said that after the first tightening by 25 base case points they will “slightly adjust the pace and probably wait a while before doing anything more”. This “while” can be even more than six months long, if for example, the Fed raises the interest rates in October. Another hike would take place in June 2016, and until then the value of money would only increase from the range of 0-0.25% to 0.25%-0.50%. This would be a good moment for longer correction of the American currency.

Tsipras' problems

Today's issue of The Financial Times informs about further problems for Alexis Tsipras. The former Greek prime minister could recently count on a quick re-election, and gaining the majority of places in parliament. Currently, he is significantly further from this goal. The Financial Times also informs that after the departure of the more radical wing, the advantage of Syriza over the New Democracy decreased to approximately 2 percent from the 12 percent gained in June.

The popularity of Tsipras himself also clearly decreased. Currently, the former prime minister is supported by only 29% of the respondents. Last month, according to a survey conducted by the University of Macedonia, it was approximately 60%. Thus, the Greek society is probably beginning to be aware that difficult times are ahead, and the confrontation with Brussels was a bad strategy.

Do these results put the introduction of the reform forced by the creditors in danger? Not necessarily. The temporary leader of the New Democracy, who is quoted by the Financial Times, claims that his party is capable of creating a coalition with Syriza, if Tsipras' party does not gain the majority needed for ruling independently.

Few words about the foreign market

The chance for an increase in interest rates in September is still relatively small, despite the fact that according to Bloomberg calculations it increased in the past few days from 20% to 40%. However, a hike in October is also possible, which in the current conditions could seem like a good compromise. Particular data from the American economy should be most significant in the following days. Especially the industrial PMI (tomorrow) and Friday's payrolls. If the readings from the American labour market are solid (more than 250k), this week may even end in the area of 1.10 on the EUR/USD.

Stabilisation and tomorrow the PMI

The base case scenario for the quotations of the EUR/PLN pair is constantly stabilisation. The calming down of the situation in Asia and relatively moderate comments from the Federal Reserve representatives, do not give any reasons for the wallet capital to undertake nervous decisions. Thus, the majority of today's transactions should be conducted in limits of 4.22-4.23 per euro.

On the other hand, tomorrow morning we will receive the PMI reading from the Polish industry. The publication can be slightly worse than expected, due to the fact that the survey was conducted during the threat of shutting down electricity due to the heat, and also the beginning of the serious disturbances in China. Thus, reaching the values close to the consensus (54.5) itself, will be considered as a positive signal and should enforce the zloty by approximately 0.01 PLN to the main currencies.

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

Range EUR/USD 1.1150-1.1250 1.1250-1.1350 1.1050-1.1150
Range EUR/PLN 4.2100-4.2500 4.2200-4.2600 4.2000-4.2400
Range USD/PLN 3.7400-3.7800 3.7200-3.7600 3.7600-3.8000
Range CHF/PLN 3.8900-3.9300 3.8900-3.9300 3.8900-3.9300

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

Range GBP/USD 1.5450-1.5550 1.5350-1.5450 1.5550-1.5650
Range GBP/PLN 5.7800-5.8200 5.7600-5.8000 5.8000-5.8400

31 Aug 2015 13:22|Marcin Lipka

This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without acknowledgement of the source is prohibited.

See also:

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