Daily analysis 31.12.2014

Yet another thread in the global manipulation of the currency rates. BP in the spotlight this time. The main ECB economist on an influence of the petrol prices on the monetary policy. The zloty stronger than the main currencies during the first part of the New Year's Eve's session.

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

• 14.30 CET: US jobless claims (survey: 290k),
• 15:45 CET: Chicago PMI (survey: 60 points),
• January 2, 2015, 9.00 CET: PMI for Polish industry for December (survey: 53 points).

Manipulation goes on

It has been a year and a half since Bloomberg wrote about organized manipulation on the currency market (our first article for WP: http://finanse.wp.pl/Bloomberg-donosi-o-manipulacji-kursami-na-rynku-walutowym, second article: http://finanse.wp.pl/Kluby-Bandytow-i-Kartele-manipuluja-rynkiem-walutowym). This case has also been discussed on many occasions in these analyses, last time in November. It turned out that 6 banks participated in such dealings were punished by the financial authorities with a fine in the amount of 4.3 billion dollars.

Yesterday Bloomberg has published an article ('The Cartel: How BP Got Insider Tips Through a Secret Chat Room') which explores the role of the British Petroleum (BP). Thanks the type of its business, BP has an advanced currency transaction section and even a special unit for generating income on the FX.

The documents obtained by the news agency may indicate that the traders of the British company might have gotten in touch with the so-called 'Cartel', meaning the chat room, in which the JPMorgan, Citigroup, Barclays and UBS dealers exchanged confidential information regarding future moves of their clients. This in an obvious way would put the company in an advantageous position and allow to generate enormous profit.

ECB to use petrol prices fall

Two recent ECB summits suggested that Mario Draghi will try to use low inflation, caused by the petrol prices fall, to introduce somewhat more aggressive monetary policy. This seems to be confirmed by an interview with the ECB economists' chief by 'Boersen-Zeitung'.

Peter Praet says the euro zone inflation is to fall below zero for 'longer period of time' and the Federal Reserve will not be able to ignore this fact any longer. Moreover, Praet thinks that the central bank shall not be paralyzed by the possible problems which the quantitative easing might trigger.

The ECB meeting planned for January 22, 2015 seems to be exceptionally interesting. Mario Draghi will most probably present an outline of the new elements of the monetary stimulation and rules of conduct towards Greece. This country will have a key decision to make three days later - whether to continue the reforms or give the country for radical socialists to rule.

Foreign market in a few sentences

Today's macro data should not change the situation on the currency market and this year should be closed around 1.2150 on EUR/USD. Friday also lacks significant events (apart from ISM from USA). However, the beginning of January may be difficult for the common currency and the suggestions included in yesterday's analysis about possible testing a level of 1.20 on EUR/USD in first several days of 2015 remain relevant.

Making up for the losses. Friday's PMI

After the Christmas manipulation , the zloty returns to its real quotations. EUR/PLN tested 4.26 today, and CHF/PLN fell below 3.55. Currently the repetition of sudden weakening on the Epiphany is not expected. The other part of the market most probably learned its lesson from recent losses and should be much better prepared than during Christmas.

It is worth paying attention to the PMI for Poland on Friday. The members of the Committee (including a key person now, Elzbieta Chojna-Duch) most recently accorded quite some importance to this particular reading. Therefore, if the HSBC Poland Manufacturing PMI report reaches or exceeds 53 points, it is fair to expect the zloty strengthening by 0.02 PLN.

After a slight volatility increase which could have been observed in the beginning of today's session, EUR/PLN should come close to the level of 4.27, and CH/PLN is expected to be little above 3.55.

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

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