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Currency and Stock Markets Weekly Outlook
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The U.S still decides
Fri, Oct 17 2008, 14:37 GMT
by Jakub Paturalski
Despite plenty of macroeconomic publications, during the previous week revelead more news regarding the never-ending crisis of the banking sector.
Stock markets began the week strongly which positively affetced the increasing eurodollar and weakening Japanese Yen against most currencies. That is a natural reaction of the market to decreasing risk aversion.
On Tuesday, the Euro discontinued gaining and finished close to Monday’s close. The british pound also experienced low volatility despite higher than expected CPI publication (0.5% against the forecasted 0.3%). No reaction to inflationary reports are not surprising since investors focus on more important news. On the other hand, the Polish Złoty strongly appreciated. The local currency gained not only because of decreasing risk aversion but mainly due to higher CPI inflation (4.5% against the forecasted 4.4%). Higher than expected industrial production drop (-2.8% against the forecasted -0.8% drop) in the U.S caused the American currency to weaken on Thursday. The end of the week brought more bad news from the American economy. Building Permits fell by -8.3% (forecast at -1.0%) while Building Starts by -6.3% (forecast at -1.7%).
Due to the current, uncertain, situation on financial markets, high volatility on the Złoty market is very common. The eurodolar is much more stable but the American currency keeps gaining and at the end of the week was quoted at $1.3445. The EUR/PLN and the USD/PLN, after big swings throughout the week, finished where they started at zł.3.5514 and at zł.2.6430 respectively.
Published on Fri, Oct 17 2008, 14:37 GMT
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Markets have not been so nervous since a very long time
Fri, Oct 3 2008, 14:00 GMT
by Adam Narczewski
Markets have not been so nervous since a very long time. Volatility on many currencies increased to over 20% during one week! On Tuesday, the American Congress rejected Paulson’s plan, which was designed to lift American banks from the crisis. The Congress did not like the idea to use public money ($700 billion) in order to cure the current situation. On Thursday though, the re-designed plan was accepted by the Senate. Everybody is holding their breath to see if it is going to work and if the planned $700 billion expenditure will be enough.
Since the beginning of the week the American currency kept gaining. It seems that American investors are cashing their investments abroad and the dollar is coming back home. Dollar appreciation is happening despite worse than expected news from the U.S labor market (nonfarm payrolls decreased by 160K against the forecasted 90K decrease). No change to the situation was European Central’s Bank decision to keep interest rates unchanged at 4.25%. The EUR/USD declined from $1.4450 to $1.3790 throughout the course of the week.
The current global situation and the strengthening dollar have great impact on the Złoty market. Investors are quitting risky investments, including the Polish currency. Fear, that the global crisis will cause an economic slowdown in Poland caused the Złoty to decrease. The EUR/PLN climbed from zł.3.3580 to zł.3.4290 while the USD/PLN increased from zł.2.3190 all the way to zł.2.5010.
Published on Fri, Oct 3 2008, 14:00 GMT
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Electrifying news
Fri, Sep 26 2008, 14:35 GMT
by Adam Narczewski
The main topic at the beginning of this past week was the electrifying news that the U.S government plans to spend $700 billion to save the tumbling financial market. After the information leaked to the public, the EUR/USD reached its weekly high at $1.4865, being at the same time an important resistance level. Not being able to brake this important level, the Eurodollar began its correction movement and finish the week at $1.4590, despite worse news from the American economy – GDP in the 2nd quarter grew only by 2.8% (against the 3.4% forecast).
Local investors were waiting for Wednesday, when the polish Monetary Policy Council (MPC) decided to keep interest rates in Poland unchanged at 6.00%. The decision itself was no surprise to analysts who expected such move. The Polish economy is clearly slowing down, which is pictured by slower wage increase and retail sales. Members of the MPC were clearly “dovish” when discussing the next steps in the monetary policy. Inflation still remains riskily high in Poland (almost twice the target established by the Polish Central Bank) but the economic slowdown should lower it. No so long ago investors expected an interest rate hike by 25 basis point but recent news put a big question mark besides that statement. Those news, along with the strengthening dollar caused the Złoty do decrease. The EUR/PLN grew from zł.3.2755 all the way to zł.3.3640 throughout the course of the week while the USD/PLN climbed from zł.2.2240 to zł.2.3055.
Published on Fri, Sep 26 2008, 14:35 GMT
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Spectacular Events
Mon, Sep 15 2008, 07:54 GMT
by Adam Narczewski
This past week currencies reacted to spectacular events instead of macroeconomic data. Last weekend, the U.S government announced that it will nationalize Fannie Mae and Freddie Mac, two of the largest institutions specializing in mortgages. The information was a positive kicker for the U.S dollar, which remained gaining till it reached $1.3881 against the euro. A correction movement on Friday, after lower than expected PPI inflation publication, lifted the Eurodollar to $1.4105.
Also very interesting was this past week in Poland. The national currency kept losing value till mid-week, mostly because of a strong dollar. Things changed on Wednesday, when the Polish Prime Minister, Donald Tusk, shocked the local financial at the financial forum in Krynica announcing that Poland might introduce the Euro already in 2011. That is a very brave declaration since Poland needs to meet many standards in order to join the Euro zone. The reaction of investors was immediate. The Złoty abruptly started gaining value and remained strong till the end of the week. The local currency advanced to zł.3.3490 (from zł.3.4720) against the Euro and to zł.2.3705 (from zł.2.4595) against the dollar. Will the Złoty strengthen next week even more? Very probable, since a correction on the EUR/USD is expected and Polish currency follows that trend.
Published on Mon, Sep 15 2008, 07:54 GMT
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Volatility increased
Fri, Sep 5 2008, 15:07 GMT
by Adam Narczewski
This past week volatility increased on currency markets. Investors were anxiously waiting for the European Central Bank’s (ECB) and Bank of England’s (BoE) decision regarding interest rates. To no surprise, both central bank’s kept interest rates unchanged at their current levels of 4.00% and 5.00% respectively. Markets did not react very strong since everybody was waiting for Friday’s U.S labor market report. Unemployment rate in the United States increased to 6.1% while nonfarm payrolls dropped by 83K in the last month. After the news were released, the EUR/USD rebounded from the week’s low at $1.4195 to $1.4320. Despite the bad news from the U.S labor market investors still seem to favor the American dollar. It has to do mostly with the weakness of the European economy.
While the U.S dollar is rebounding, the Polish Złoty is still slumping. The local currency follows the trend established by the Eurodollar. The gaining dollar caused the USD/PLN to increase from zł.2.2715 to zł.2.4005 throughout the course of the week. The EUR/PLN reached its highest level since April at zł.3.4350. There are signs that the Polish economy is slowing down although the last GDP reading was higher than expected. There is still room for another interest rate hike by the Monetary Policy Council but more experts predict that it will not happen this year. In the next couple of weeks the Polish Złoty will depend on the American dollar.
Published on Fri, Sep 5 2008, 15:07 GMT
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Stock markets weekly brief
Wed, Sep 3 2008, 10:13 GMT
by Adam Narczewski
This past week brought hope that the situation on stock markets is stabilizing. Indices worldwide gained mostly after better than expected news from the U.S market. The whole world is watching what is going on in Georgia.
The situation on financial markets is still pretty tough. The financial sector is still closely watched by investors. At the beginning of the week news spread that the another financial institution in the U.S went bankrupt – Columbia Bank and Trust. Also, the deal to acquire Lehman Brothers by the Korean Development Bank was blocked. At the same time, investors learned that the U.S housing market is still in trouble as existing and new home sales were worse than expected. Stock markets declined to recover in the second part of the week.
The news that helped stock indices to climb were published on Wednesday. Durable Goods Orders in the U.S increased higher than forecasts. Thursday was even better for investors as GDP in the U.S grew by 3.3% in the second quarter (second reading, first at 1.9%) while analysts expected 2.6%.
Stock markets are very sensitive to good news recently so they reacted strongly and regain the field they lost at the beginning of the week. The Dow Jones Industrial Average gained 1.9% (till Thursday) while the S&P 500 advanced 1.6%. Asian markets followed the path established by U.S indices. The Nikkei 225 gained 1.6%, similar to Hang Seng.
The Polish stock market did not do as well as global indices. The WIG20 finished the week exactly where is started. It was a very slow week, especially Monday and Tuesday where volume was at 460 million and 500 million respectively.
Published on Wed, Sep 3 2008, 10:13 GMT
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A lower Eurodollar
Mon, Aug 18 2008, 10:22 GMT
by Adam Narczewski
We have interesting things going on the currency market. The Eurodollar has not been quoted so low since the end of February. How low can it go? This week’s macro publications should not be decisive but some will bring attention of investors.
Monday will lack important news so the week for investors will actually start on Tuesday. The Bank of Japan is expected to keep interest rates at 0.5%. Any other decision will be a surprise to the markets. News that the biggest European economy is slowing down due to the slowdown of its biggest economy – Germany, will cause investors to focus on the German ZEW Economic Sentiment reports as well as on the German PPI. In the afternoon, in the spotlight will be news from the U.S – the PPI report and Building Permits publication.
Wednesday will be much calmer. The Bank of England will publish its minutes from their last meeting. Investors playing on the CAD will certainly wait for the Canadian Retail Sales report.
Thursday will be rich in macroeconomic publications but investors will need to focus only on a couple of them. From Europe important will be the Euro zone’s PMI and British Retail Sales. We will also get more news from the Canadian economy with the CPI report. From the U.S we will expect the weekly unemployment claims publication and the Philadelphia Fed Manufacturing Index.
On Friday investors’ attention will be on the British revised GDP report and on Ben Bernanke’s speech. The Fed’s Chairman is due to speak about financial stability at the Federal Reserve Bank of Kansas City Economic Symposium in Jackson Hole.
Published on Mon, Aug 18 2008, 10:22 GMT
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Trichet expressed his fear
Fri, Aug 8 2008, 13:57 GMT
by Jakub Paturalski
Last week in spite of lots of significant fundamental data, the market was totally dominated by the ECB’s decision with regard to interest rates in the Euro Zone and the press conference of the ECB’s chairman - Jean-Claude Trichet.
Interest rates remained unchanged at the level of 4.25%, but during the conference Trichet expressed his fear about the Euro Zone’s inflation and especially low economical growth. Investors did expect some information with regard to an eventual hike on rates in the near future, but to no avail.
This seemed enough for the EURUSD market to plummet to the boarders of 1.51 despite the worse than expected readings from the US labor market (forecast: 420K unemployment claims, actual value 455K). What has to be added is that the strengthening of the US currency was aided by better than expected results regarding US Pending Home Sales (forecast -1%, actual value +5.3%).
The appreciation of the US Dollar did cause a significant corrective movement on commodities markets, above all oil which currently stands at 115 $ and gold standing at 860 $.
What has to be also noted is that the Federal Reserve decided to keep rates unchanged at the level of 2%. This event however, had no effect on the EURUSD market.
As to the Polish market, there is increasing fear of the probable rise of interest rates. Economy Minister Waldemar Pawlak said that strong zloty is threat for Polish economy and that the Ministry of Finance should be engaged in finding a solution to the problem. It has to be however stated that the Polish currency lost on value against all major currencies and currently the USDPLN and EURPLN stand at 2.17 and 3.27.
Published on Fri, Aug 8 2008, 13:57 GMT
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Economic outlook
Mon, Jul 28 2008, 14:37 GMT
by Adam Narczewski
In terms of macroeconomic publications, the upcoming week is vacation time. Only till Thursday since on Friday investors are waiting for the bomb – U.S labor market reports.
On Tuesday, worth attention will the Conference Board Consumer Confidence Index. Last Friday’s University of Michigan index was much better than expected. Will the Conference Board’s index also surprise investors? On Wednesday, I will pay attention to two reports. The first from the Euro zone – unemployment rate (no change expected from the current 4.0%) and the American ADP Nonfarm employment change. The ADP report somehow can be a good prediction of what the Friday payrolls will be.
The end of the week will be much more interesting. On Thursday, early in the morning we will get news from Australia – retail sales and trade balance. Those playing on the AUD will certainly be expecting those numbers. Worth attention is also the Swiss CPI report. It seems that inflation is not a problem to the Swiss economy (expected drop to -0.5% on a monthly basis). In the afternoon, investors will get the Canadian GDP (m/m) and the U.S GDP (q/q). The second of those will certainly be anxiously awaited.
Friday will be the day we are waiting on. The U.S will release its labor market report. Unemployment rate is expected to increase and nonfarm payrolls are forecasted to drop even more. As the housing market might be slowly recuperating, there are no signs that the labor market crisis might end soon. From other markets, reports that can cause some movements include The U.S ISM Manufacturing report as well as the British PMI.
The whole week should be rather slow and before Friday there are no publications that can shock the world. Again, the U.S labor market report will be crucial and will decide on the short-term movements of indices and the dollar.
Published on Mon, Jul 28 2008, 14:37 GMT
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EURPLN reaches all−time low
Mon, Jul 28 2008, 09:20 GMT
by Adam Narczewski
This past week lacked important macroeconomic information so local currencies followed the Eurodollar market. What was decisive were quarterly reports published by American companies and those were mostly worse than expected (Wachovia, Apple, Texas Instruments). Surprisingly, U.S equities markets reacted with a strong increase, which was an impulse for the dollar to gain value. Sentiment towards the American currency came back and the EUR/USD tumbled all the way to $1.5690 on Friday while at the beginning it remained way over the $1.59 level.
The Polish currency experienced big swings throughout the course of the week. The gaining dollar and decreasing risk aversion caused investors to pull their money out of emerging markets’ investments and put them into U.S equities. The Złoty tumbled and reached zł.3.2650 against the Euro and zł.20770 against the dollar. During the second part of the week, the local currency regained momentum. Core inflation in Poland grew to 3.4% while the market forecasted a 3.3% increase. Analysts expect that the Monetary Policy Council will hike interest rates next week on Tuesday by another 25 basis points to 6.25%. Such scenario is possible but the MPC might wait another month to see how the Polish economy is doing. Friday’s reports (unemployment remained at 9.6% and retail sales increased by 14.2%) showed that a major slowdown will not happen soon. The EUR/PLN finished the week at zł.3.2030 (all-time low) while the USD/PLN at zł.2.0410.
Published on Mon, Jul 28 2008, 09:20 GMT
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Building recovering?
Mon, Jul 21 2008, 14:46 GMT
by Adam Narczewski
After last week’s vast amount of information, this week investors can catch their breath. Still, some reports can move the markets, especially the U.S housing market publications.
The beginning of the week should be slow. On Monday, no news bring my attention. On Tuesday, the most important report will be regarding Canadian retail sales. Also, speeches by Bank of England’s Governor King, U.S Treasury Secretary Paulson and FOMC Member, Plosser. I would focus on King’s speech, who is due to testify, along with BOE Deputy Governor Sir John Gieve, on banking reforms before Parliament’s Treasury Committee in London.
On Wednesday investors should still focus on the UK (MPC meeting minutes) and Canada (CPI and Core CPI inflation). From the U.S we will get the crude oil inventories publication and the Beige Book (recently ignored by analysts). For investors playing on the NZD it needs to be mentioned that New Zealand’s central bank will release its interest rate statement. No change from the current 8.25% is expected.
News from Europe will bring investors’ attention on Thursday morning. We will get to know the manufacturing PMI from the Euro zone and German Ifo Business Climate Index. Later on, the UK will release its retail sales report. In the afternoon, the most important publication from the U.S will be released - Existing Home Sales. Following this, on Friday the New Home Sales report will be published. Those publication should give us a better view of what is going on in the American housing market. Last week’s reports (building permits and building starts) were much better than expected giving investors hope that the market sector that caused the global crisis, is finally recovering.
Published on Mon, Jul 21 2008, 14:46 GMT
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Finally happened
Mon, Jul 21 2008, 08:48 GMT
by Adam Narczewski
The moment investors were waiting on finally happened. The Eurodollar reached a new all-time high at 1.6039 on Tuesday. There was no clear impulse for such strong action. What caused the depreciation of the American dollar was the worsening investment climate on global stock exchanges causing an exodus from assets denominated in U.S dollars. Macroeconomic news that were published later on during the week, caused the EURUSD to retreat all the way to 1.5850. The main reason for this correction movement was higher than expected publication of U.S CPI. Inflation in America grew by 1.1% on a monthly basis and to 5% on a yearly basis. Such news brought the discussion back about considering hiking interest rates in the U.S. Surprisingly good news from the American housing market were published on Thursday. According to them, housing starts increased by 9.1% while building permit by 11.6% in July, way above expectations. Is the crisis caused by the housing market really over? Probably not but the first signs of recovery are pretty visible.
The Polish currency continued gaining value. Confirming strong inflationary pressures were Tuesday reports about wages (increase by 12% against the 11.1% forecast) and Polish CPI (4.6% against 4.5% expectations). Another interest rate hike in Poland is still a great possibility. The global increase of oil and food prices is somehow neutralized by a strong currency but still inflation is increasing. The demand for the Polish currency is still strong. Even worse news from the economy, like Friday’s industrial production report (7.2% in July against the forecasted 9.6%), do not change the whole picture. The EURPLN dropped from 3.2550 to 3.2140 throughout the course of the week. Meanwhile, the USDPLN decreased from 2.0525 all the way to 2.0260. There are no signs that the Złoty might stop gaining but a correction movement is expected.
Published on Mon, Jul 21 2008, 08:48 GMT
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inflation data in the spotlight
Mon, Jul 14 2008, 10:36 GMT
by Adam Narczewski
It is mid-summer and it is getting hot on the financial markets. The upcoming week is full of inflation reports. Those will decide on monetary policy of central banks so investors need to pay close attention to them.
On Tuesday a bunch of important reports will be published. The GBP will certainly react to the CPI publication. This report will show how the British economy is doing (recently not so well) and maybe give another problem to the British Monetary Policy Council. The same day we expect important news from the United States. Important will be the retail sales report and the PPI publication. Later in the afternoon, Ben Bernanke is due to give the semiannual monetary policy testimony before the Senate Committee on Banking, Housing, and Urban Affairs in Washington DC. Not only the USD will be watched. Investors playing on the JPY are expecting the Bank of Japan interest rate statement (no change from the current 0.5%), the same as those betting on the CAD with the Bank of Canada interest rate statement (no change expected from the current 3.0%). Also, in the Eurozone, the German ZEW Economic Sentiment report will be published.
On Wednesday we continue with inflation reports. The Euro zone will publish its CPI report along with the U.S. Investors need to pay attention also to the U.S industrial production and the second day of Bernanke’s testimony. At the end of the FOMC meeting minutes will be published, which are a detailed record of the committee's interest rate meeting held about two weeks earlier.
On Thursday, we will get news from the U.S housing markets with the Building Permits and Housing Starts report. Worth attention also will be the unemployment claims and the Philadelphia Manufacturing Fed Index.
On Friday investors will feel like on a vacation. Bank of Japan’s Governor Shirakawa is expected to speak. Also the Euro zone trade balance will be published.
The upcoming week is rich in inflation reports from the biggest economies in the world. They will be followed very carefully since those will decide on the future monetary policy of the ECB and the Fed.
Published on Mon, Jul 14 2008, 10:36 GMT
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After an strong week
Mon, Jul 7 2008, 10:19 GMT
by Adam Narczewski
Last week ended strongly on Thursday with the ECB interest rate statement and the U.S labor market report. The upcoming week will be much calmer and should not cause heart attacks of investors although certain reports and publications will be followed very thoroughly.
The more important reports will be revealed on Tuesday. Investors will be waiting for the U.S Pending home sales publication. No shocking news are expected since the economy is slowing down. Related to the housing market will be Ben Bernanke’s speech about financial regulation and stability at the Federal Deposit Insurance Corporation’s Forum on Mortgage Lending in Arlington.
On Wednesday, investors will focus on news from Europe. The U.K will publish its Trade Balance while ECB’s President, Jean-Claude Trichet, will present the ECB's 2007 Annual Report at the plenary session of the European Parliament in Strasbourg. At the end of the day, those watching closely the oil market will be expecting the crude oil inventories report from the U.S.
Thursday will certainly be the most hectic day for the markets regarding macroeconomic publications. The British Monetary Policy Council will decide on interest rates in the U.K. No change from the current 5.00% is expected although the MPC might surprise investors. Inflation increased and is becoming a problem for the British economy. Will the MPC follow last week’s ECB decision and hike interest rates? We will know the answer on Thursday. It will be an important day for the U.S markets too. Ben Bernanke will testify, along with Treasury Secretary Henry Paulson, on financial market regulation before the House of Representatives Committee on Financial Services in Washington DC. Such events always bring attention of investors since the future monetary policy of the Fed can be revealed.
On Friday, a couple of reports can move the markets. The Canadian dollar is pretty volatile recently so investors playing on the CAD will await reports from the Canadian economy: Employment Change, Unemployment rate, and the Trade balance. At the endof the day, the U.S will be back in the spotlight with the Trade Balance publication and the preliminary University of Michigan Consumer Sentiment report.
A couple of reports that are being published this week can move the markets. But can they change the downward trend that we are currently experiencing? Probably not, but they can give us hope for a soon change.
Published on Mon, Jul 7 2008, 10:19 GMT
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A tough situation
Fri, Jul 4 2008, 13:43 GMT
by Adam Narczewski
Global equities markets are in a tough situation. Declining indices and session finishing in red are not the best advertisement for stocks recently. The mood of investors is not good and it seems that this situation can last for some time.
This past week was no different. Declines were not spectacular but steady. The American economy is far from recovering, and investors are starting to get worried. The Dow Jones Industrial Average declined by 1.25% to 11,287 while the S&P 500 dropped by 1.89% to 1,261. It has to be noted that markets were closed in the U.S on Friday due to the Independence Day holiday. European indices followed the American lead and continued to decline. The Polish WIG20 finished the week in red at -2.30% and is closing to the “magical” 2,500 barrier.
Macroeconomic news that were published this week did not help bulls to lift the markets. The labor market in the U.S is still in crisis confirmed by the increased unemployment rate to 5.5%. The Nonfarm payrolls report showed a -62K reading, almost the same as analysts expected. Important to investors were also the ISM reports. While the ISM-Manufacturing reading was above 50 points (at 50.2, better than forecasts), the more important ISM-Services publication was negative. The ISM-Services index dropped below 50 points to 48.2, which indicates that the economy is heading into recession.
It is a hard time to invest in equities right now. Speculators are excited since soon they can attain good bargains. We need to be patient since the occasion might not come so soon.
Published on Fri, Jul 4 2008, 13:43 GMT
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U.S unemployment and ECB's decision
Mon, Jun 30 2008, 10:03 GMT
by Adam Narczewski
The upcoming week will decide on the direction of the main currency pair in the world – the Eurodollar. The news investors are waiting for will be published on Thursday. The European Central Bank (ECB) is expected to hike interest rates by 25 basis points to 4.25%. Such move would have been a big surprise a couple of weeks ago but recent reports revealed the inflation is increasing quickly in the Euro zone and the ECB needs to take steps to fight it. As important as the decision itself will be the press conference afterwards. Investors expect Jean-Claude Trichet, ECB’s President, to reveal the direction of the future monetary policy of the European central Bank.
The Euro has been discounting ECB’s decision but what can strengthen the common currency even more can be bad news from the U.S. On Thursday, the American labor market report will be published. The data will be released a day earlier than usual due to the U.S holiday (Independence Day) on the first Friday of the month. The market expects that unemployment in the nonfarm sector will fall confirming the tough situation of the U.S labor market that is slowing down the economy. Later on that day the ISM non-manufacturing report will be published. It will certainly be important since services account for 2/3 of the American economy.
Till Thursday markets should not be very volatile. Only a couple of reports can cause bigger movements. On Monday, the Canadian GDP will be released and this publication can certainly have an impact on the CAD. Tuesday will bring us the American ISM Manufacturing report, which is expected to remain under 50 points, indicating recession. Investors playing on the AUD will follow the Australian Central Bank’s decision regarding interest rates. No change from the current 7.25% is expected. On Wednesday, worth attention will be Trichet’s speech in Paris and the U.S ADP Employment report. We will also follow the Crude oil inventories report since can have a big effect on oil prices, as it had last week.
After this week we will have the answer to many questions. The U.S labor report will reveal in what condition is this sector of the economy. If the situation is pretty bad, an interest rate hike by the Fed in the near future will be very questionable. We will also have more information about the ECB’s monetary policy. Inflation is becoming a danger to global economy and the ECB might be the first “big” central bank to react. Investors with great attention will also be listening to the words of Trichet on the press conference following the decision. If the speech will be interpreted as “hawkish”, the EURUSD will be attacking the 1.60 level, trying to reach a new all-time high.
Published on Mon, Jun 30 2008, 10:03 GMT
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Currency Outlook
Mon, Jun 23 2008, 12:07 GMT
by Adam Narczewski
Investors were anxiously waiting for the upcoming week, especially for Wednesday’s decision of the Fed regarding interest rates. The market expects the American central bank to leave the federal funds rate unchanged at 2.00%. That would stop a series of interest rates decreases in the U.S. Inflation is a danger to the economy and it seems the Ben Bernanke finally noticed it. Also on Wednesday, the Polish Monetary Policy Council (MPC) will announce the new level of interest rates in Poland. Another decision than an interest rate hike by 25 basis points to 6.00% would be a big surprise.
Even though the market focuses on the Fed’s decision, other important macroeconomic reports will be published this week. On Tuesday, the Conference Board will publish its U.S Consumer Confidence index, which measures the mood of consumers in regard to economic conditions. This week will get more news from the U.S housing market. On Wednesday, the New Home Sales report will be published. The more important, Existing Home Sales publication, will be published on Thursday. Finally, investors will get good news since sale of homes is expected to increase by 1.4%. Is the housing market crisis over? Probably not yet, but the market will get any good news.
Other reports worth attention that will be published this week include the U.S durable goods orders (Wednesday), U.S Final GDP for the First Quarter (Thursday), and Friday’s revised University of Michigan Consumer Sentiment report.
Published on Mon, Jun 23 2008, 12:07 GMT
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Currency Report
Fri, Jun 20 2008, 14:31 GMT
by Adam Narczewski
Due to the lack of other important macroeconomic reports this past week, investors focused on inflation data and possible future monetary policy of major central banks – the ECB and the Fed. CPI in the Euro zone exceeded analysts’ forecasts and reached 3.7% on a yearly basis. Despite increasing inflation in the U.S (confirmed by Tuesday’s PPI publication), the market expects the ECB to make the first move and hike interest rates. The EUR/USD reacted to those speculations by increasing from $1.5360 all the way to $1.5605 throughout the course of the week.
Macroeconomic publications from the Polish market surprised investors. Industrial production increased only by 2.3% in May on a yearly basis against the forecasted 7.4% increase. On the other hand the PPI reading was above market expectations confirming that inflationary pressures in Poland are still high. Slower industrial production in May should not be shocking for investors since there were two “long weekends” due to holidays. The Polish Monetary Policy Council (MPC) will probably not take into account one worse-than-expected publication and will certainly hike interest rates by 25 basis points next week. Inflation is still a danger for the worldwide economy with rushing prices of oil and food. The Polish currency has been discounting such move this past week. The EUR/PLN dropped from zł.3.3860 to zł.3.3660 while the USD/PLN declined from zł.21970 all the way to zł.2.1550.
Published on Fri, Jun 20 2008, 14:31 GMT
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Economic Weekly Outlook
Mon, Jun 16 2008, 13:01 GMT
by Adam Narczewski
Summer is approaching and is getting hot on financial markets. The upcoming week will certainly be interesting and news from the U.S will not be on the spotlight as usual.
On Monday, investors will be waiting for news from the American market with the TIC Net Long-Term Transactions publication being released. Later on all eyes will be on Ben Bernanke who is due to deliver a speech entitled "Challenges for Health-Care Reform" at the Senate Finance Committee Health Reform Summit in Washington DC. The topic might not be of global interest but since audience questions are expected, Fed’s Chairman might reveal more about future monetary policy.
The economic calendar is full for Tuesday. In the morning, UK’s CPI will be published and that will be important news for the GBP. Just after that, in Germany the ZEW Economic Sentiment index will be revealed. No big movements of the euro are expected since the market reacts stronger to the Ifo Institute publication. In the afternoon investors will be flooded with macroeconomic reports from the U.S including: PPI, Core PPI, Building Permits and Industrial Production. In my opinion, any of the above, can have great impact on the dollar.
Wednesday will be much calmer. Interesting reports include the Bank of Japans and Bank of England MPC minutes from their last meetings. At the end of the day, BOE’s Governor King is expected to deliver a speech.
Thursday we will start with the Swiss Central Bank interest rate statement. No change from the current 2.75% is expected. Following that, the UK will release the Retail Sales report. Investors betting on the CAD will certainly pay attention to the Canadian CPI publication. From the U.S news worth attention include the Unemployment Claims and the Philadelphia Fed Manufacturing Index.
Surprisingly, Friday will be the calmest day on the markets. More news from Canada are expected with the Retail Sales publication. At the end of the day, ECB President, Jean-Claude Trichet, will be speaking at the Forum of the Financing of Enterprises in Belgium.
Published on Mon, Jun 16 2008, 13:01 GMT
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Dollar strikes back
Mon, Jun 16 2008, 10:01 GMT
by Adam Narczewski
Last week showed that sentiment towards the dollar is still strong. Speeches given by Fed’s Chairman, Ben Bernanke, were interpreted as “hawkish” causing the eurodollar to drop from $1.5825 all the way to $1.5320 throughout the course of the week. Bernanke mentioned that inflation can be dangerous for the American economy and that the Fed will “take all necessary steps” to fight it. Analysts already predict interest hikes in the U.S to 2.75% till the end of the year. The threat of inflationary pressures was confirmed by Friday’s U.S CPI publication, which showed that inflation in America grew to 4.2% on a yearly basis against the forecasted 3.9%.
Inflation is also the main topic among Polish investors. It seems very probable that the Polish Monetary Policy Council (MPC) will increase interest rates by 25 basis points to 6.00% on its June meeting. Friday’s CPI report showed that inflation in Poland grew to 4.4% on a yearly basis against the forecasted 4.3% (previously at 4.0%). Now, the MPC is waiting for Monday’s publications regarding the Polish labor market and wages, which can confirm strong inflationary pressures. Despite possible interest rate hikes in Poland, this past week was not so good for the Polish currency. The strong dollar was the main cause for the Złoty to lose ground. The EUR/PLN increased from zł.3.3745 to zł.3.3880, reaching even zł.3.40 on Friday. The Polish currency lost the most against the strengthening dollar. The USD/PLN shoot up from zł.2.1430 all the way to zł.2.2095. Is this just a correction movement or the trend of the Złoty changed? Next week we should have the answer to this question.
Published on Mon, Jun 16 2008, 10:01 GMT
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The fear of recession in America stroke back
Mon, Jun 9 2008, 13:07 GMT
by Adam Narczewski
After last Friday’s U.S labor market report, the fear of recession in America stroke back. Markets dropped and the dollar tumbled. How investors will react to the situation? The upcoming week can bring some answers since some interesting macroeconomic reports will be published.
On Monday, investors will pay attention to the Pending Home Sales publication from the U.S and Jean Claude Trichet who is due to speak at the Forum for New Diplomacy in Paris. Tuesday will be much more exciting. We will start the day with Ben Bernanke who will deliver a speech titled "Outstanding Issues in the Analysis of Inflation" at the Federal Reserve Bank of Boston 53rd Economic Conference in Massachusetts. Bank of England’s Governor, Mervyn King, will also be speaking at the British Bankers Association Annual Banking Conference in London. Close attention will be paid to the U.S and Canadian Trade Balance publication. For investors, who play on the Canadian dollar, the news of the day will be the Bank of Canada’s interest rate statement.
Wednesday will be calmer with the most important publication being the Beige Book. On Thursday, we will get reports from the U.S economy including retail sales and unemployment claims. Again, close attention will be paid to Bernanke who will give introductory remarks at the dedication of the New Federal Reserve Bank of Kansas City in Kansas City.
Same as last week, Friday might be the most important day of the week. Investors betting on the Australian dollar, important will be RBA’s Governor Stevens, who is expected to speak about economic conditions at the American Chamber of Commerce in Australia Luncheon in Melbourne. Also, a press conference by the Bank of Japan is expected. At the end of the day American CPI will be published and that is the publication that investors are waiting on. If inflation in the U.S really increases, it will be the last confirmation that the Fed will stop cutting interest rates.
Published on Mon, Jun 9 2008, 13:07 GMT
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Weekly Outlook
Fri, May 30 2008, 15:38 GMT
by Adam Narczewski
We have not had such an exciting week ahead of us in a long time. We kick-off on Monday with the U.S ISM-Manufacturing report, which supposed to remain at the same level, still below 50 points (at 48.6) meaning a slowdown of the economy. Also, investors will pay attention to Jean-Claude Trichet, who is due to speak at the ECB's 10th Anniversary conference.
On Tuesday, those who play on the AUD need to follow the RBA interest rate statement. The day though will be filled with speeches of central banks’ chairmen. ECB’s chairman, Trichet, is expected to deliver a speech at the International Monetary Conference, in Barcelona. Bank of Japan’s Governor Shirakawa and Fed’s chairman, Ben Bernanke, will speak at the same conference.
Interesting things will be happening on Wednesday. Early in the morning we will learn the Australian GDP for the first quarter while late at night New Zealand’s interest rate statement. In the meantime, the financial world will be focused on news flowing from the U.S. We will get to know how the labor market is doing with the ADP Nonfarm Employment Change. Later on, the ISM-Nonmanufacturing report will be in the spotlight. The index is expected to remain above 50 points, indicating expansion. A series of speeches continues Bernanke, who will deliver a speech titled "Economic Challenges: 1975 and Now" at the Harvard Alumni Association's Class Day Exercise in Cambridge.
Thursday will be crucial for European investors. Both, the European Central Bank and the Bank of England are expected to release their interest rate statements. Analysts expect no changes from the current levels – ECB at 4.00% and the BOE at 5.00%. More important for investors will be the press conferences held after the decisions.
Big day on Friday! Actually, for this day investors have been waiting for a long time. Reports from the U.S labor market will be published and the outlook is not good. Unemployment rate is forecasted to increase to 5.1% from the previous 5.0%. The most important publication, Nonfarm payrolls, does not look optimistic neither. Analysts expect that 57K people lost their jobs in the nonfarm sector, which is worse than previously.
The summer is coming but investors are not in a vacation mood. This week, with the vast amount of important macroeconomic publications, will be very important for financial markets, since it can influence them for the next couple of weeks.
Published on Fri, May 30 2008, 15:38 GMT
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Economic outlook
Mon, May 19 2008, 10:46 GMT
by Adam Narczewski
Last week’s inflation reports moved currency and stock markets. The upcoming week should be as interesting as the previous one.
The situation on financial markets seems to be stabilizing, which is really a good sign. There are couple of macroeconomic reports being published this week that can provide more insight into the global economic situation.
On Tuesday, we will get the Producer’s Price Index (PPI) from the U.S. In Europe, Germany will publish its ZEW Economic Sentiment index. Polish investors will be following the Swiss PPI report. Why? Higher than expected PPI is a signal of increasing CPI inflation, which is bad news for Polish credit holders. More and more debt is denominated in Swiss francs so the possibility of an interest rate hike in Switzerland (higher inflation can cause such move) will be more probable.
On Wednesday, we will get to know the German Ifo Business Climate Index. In the spotlight will be the Bank of England’s and Fed’s minutes from their last meetings. Investors betting on the Canadian dollar should pay attention to the Canadian CPI report. Recently, the CAD is on the rise already dropping below the 1.0 level against the American dollar.
Thursday will bring more news from the Canadian economy with the retail sales report. The same report will be published by the UK. The American labor market is in a small crisis recently so investors should pay attention to the weekly unemployment claims report.
The last day of the week will bring us a series of European PMI publication. Most important will be the second estimate of UK’s GDP and the always important publication from the U.S housing market – Existing Home Sales.
The upcoming week will be rich in macroeconomic publications from the Polish economy. On Monday we will get to know the Average Wages and Average Employment. Wages are expected to grow by 11.5% on a yearly basis from the previous 10.2%. That would be another sign that inflationary pressures in Poland are still strong. On Wednesday, the PPI and Industrial Production reports will be published, both being important to the Polish currency
Published on Mon, May 19 2008, 10:46 GMT
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Weekly Currency Brief
Fri, May 16 2008, 15:30 GMT
by Adam Narczewski
Currency markets are pretty volatile recently and it was no different this past week. These big swings were caused by the inflation reports published in the United States, the Euro zone, the UK and Poland.
In the Euro zone CPI inflation stayed unchanged at 3.3% (on a yearly basis), which is way above the 2.0% limit set by the European Central Bank (ECB). High inflation is a problem since the European economy is slowing down and an interest rate cut seems reasonable. Right now, the chances for such move by the ECB declined causing the Euro to strengthen. At the same time, CPI inflation in the U.S declined to 0.2% on a monthly basis, which was lower than forecasted. During the course of the week, the EUR/USD advanced from $1.5390 to $1.5485 reaching even $1.5560 on Monday. It seems that this is just a corrective movement and soon the American dollar will keep strengthening.
As usual, investors experienced big swings on the Złoty market. This past week the Polish currency reached new records against the Euro at zł.3.3745 and the American dollar at zł.2.1665 on Tuesday. The Złoty started losing value on Wednesday when we learned that CPI inflation in Poland dropped to 4.0% on a yearly basis against the forecasted 4.1%. Such reading lowers the chances for an interest rate hike by the Polish Monetary Policy Council in May or even June. The Złoty ended the week at zł.3.3855 against the Euro and at zł.2.1845 against the dollar.
Published on Fri, May 16 2008, 15:30 GMT
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Low volatility on equities markets
Wed, May 14 2008, 10:34 GMT
by Adam Narczewski
The beginning of the week on stock equities markets can be described by one word - boring.
Stock markets are in consolidation since the beginning of the week. There are no strong impulses that can move markets. Yesterday’s session on Wall Street ended at the levels it began. The Dow Jones Industrial Average lost 0.34% to 12,832 while the S&P 500 ended 0.04% lower at 1,403. More active were investors in Asia moving the Japanese Nikkei 225 up by 1.18% to 14,119. Little was going on in Warsaw with the WIG20 losing 0.3% to 3,024.
Investors were waiting for macroeconomic reports with the U.S retail sales being the most important. The reading showed that retail sales declined by 0.2% on a monthly basis (same as forecast) but core retail sales (excluding auto sales) increased by 0.5% (0.2% FC). Investors focused on the second part of the report, on the better news. The market did not react very strong nor it did to Ben Bernanke’s speech. The Fed’s Chairman reminded that the situation is tough and that the U.S Central Bank will keep pumping money into the financial until it is necessary. What is not helping the stock markets to rebound are also high oil prices staying well over 120 USD per barrel.
Investors in Poland were hoping for a good day, after the U.S indices closed at +1.0% the previous night. In reality, there is too little capital on the floor to move the market. Foreign capital is already gone from the Warsaw Stock Exchange and individual investors have too little power. The main index, the WIG20, moved up after better-than-expected U.S retail sales report but after a neutral opening on Wall Street, the market retreated and ended below the day’s opening. The problem is still low volatility with volume reaching only 1 billion zlotys.
Further moves of stock markets might depend on inflation reports being published this week. Today, the American and Polish CPI will be published while tomorrow we expect such report from the Euro zone.
Published on Wed, May 14 2008, 10:34 GMT
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Are the bad times behind us?
Mon, May 12 2008, 14:03 GMT
by Adam Narczewski
Now, when markets are slowly rebounding investors are following macroeconomic news with great attention. The week ahead of us will bring a bunch of inflation reports.
Are the bad times behind us? This question is being asked by many investors all around the world. This week inflation reports will be on the spotlight? Why are they so important? They determine the future monetary policy of central banks.
On Tuesday, we are expecting a report from the UK, where both CPI and Core CPI are forecasted to increase. The same day, Ben Bernanke, Fed’s Chairman, is due to speak to the Atlanta Fed's Financial Markets Conference, via satellite. On Wednesday, the U.S will publish the CPI report, with inflation expected to remain unchanged from the previous month. The Bank of England will also publish its Inflation Report. The Bank of England (BOE) Inflation Report provides detailed economic analysis and an assessment of inflation over the next two years. The report is published quarterly and holds critical insights into the bank's view of inflation and the economic conditions that will effect interest rates in the future.
Thursdays are usually rich in macroeconomic publications and this time will be no exception. With great anticipation we are expecting the Euro zone CPI publication and industry reports from the United States: the Empire State Business Conditions Index, the TIC Net Long-Term Transactions, Industrial Production, and the Philadelphia Fed Manufacturing Index. Also, Bernanke is expected to deliver a speech titled "Credit Market Turmoil: Causes, Consequences and Cures" at the Chicago Fed's annual conference.
Friday will be calmer. Publication worth attention include Japanese GDP, Euro zone’s Trade Balance, and U.S’s University of Michigan Consumer Index.
The upcoming week will tell us about inflationary pressures in many economies. Investors anxiously are waiting expecially for the Euro zone’s report. The European Central Bank is in a tough situation, where inflation is increasing while the economy is slowing down. Higher than expected inflation might burn the idea to cut interest rates in the Euro zone in the second half of the year.
Published on Mon, May 12 2008, 14:03 GMT
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Oil scares investors
Fri, May 9 2008, 15:28 GMT
by Przemysław Kwiecień
Last week started in fairly upbeat moods. After slightly better than expected data from the US and overall decent results from the global companies, stock indices were moving up and the dollar gained versus the major currencies. At certain stage we even witnessed a break through the resistance level of 1,5350 at the EURUSD, which could lead to a further decline. This, however, didn’t happen partly because of hawkish comments from the ECB’s President and partly because of a rise in oil prices. Since the May 1st oil gained as much as 15% in the dollar terms sparking an unrest about prospects of the World economy and leading to a significant correction on the stock markets. Should high oil prices persist, not to mention a further rise, the prospects of a rapid recovery in the US economy would be gone and stock indices would sink further, together with the USDJPY, which so far stopped at the 102,60 support. A fall on USDJPY would to some extend support the euro and the frank.
Published on Fri, May 9 2008, 15:28 GMT
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Central banks and the trade gap in focus
Mon, May 5 2008, 09:38 GMT
by Przemysław Kwiecień
Coming days on financial markets should be considerably calmer than the last week, as the list of macroeconomic reports to be released is much shorter and the most crucial earnings reports are already behind us. The last week’s US data was a bit better than expected but not decisive and therefore the market is reverting big slide in the EURUSD (to around 1,55 from 1,5360, a crucial support level on Friday) and stock indices are far from rocketing despite conquering the resistance. This week, investors are focusing on the activity in the US’s services (today) and trade balance data (on Friday), as well as the rate decisions in the Euro zone and the UK (both banks are expected to leave rates unchanged on Thursday).
Published on Mon, May 5 2008, 09:38 GMT
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Forex Weekly Overview
Tue, Apr 29 2008, 13:55 GMT
by Przemysław Kwiecień
In the last week we witnessed a major change in the sentiment on the forex. After numerous attempts the euro broke through the psychological 1,60 USD level, scoring the new record at 1,6018. However, the market clearly was not certain if yet another wave of the dollar depreciation could be possible and what how monetary authorities could respond to it. The EURUSD didn’t manage to stay above the 1,60 threshold and this was the major reason for the correction. Later in the week the US currency was supported by earnings results which were better on average, as well as the macroeconomic data, especially unexpectedly low Ifo in Germany and a drop in initial claims in the US. The euro was 1,5% down on the week and more than 2,5% down from its peak, while the Swiss frank lost over 1,5% and the Japanese yen 0,6%. The coming week will show how strong the correction can be with the US advanced GDP for the 1st quarter, the Fed decision and energy giants’ results as main drivers. Falling EURUSD also sparked a noticeable sell off on the Polish market. The zloty was down almost 2% to the dollar and 0,3% to the euro on the whole week after scoring a multiyear high to the USD late on Tuesday. While the end of coming week should be very calm due to the holiday on Thursday, investors are awaiting the MPC decision before. This time, we expect the rates to remain unchanged.
Published on Tue, Apr 29 2008, 13:55 GMT
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Still on earning reports
Mon, Apr 21 2008, 10:29 GMT
by Przemysław Kwiecień
While on the macroeconomic front this week will be much more relaxed, investors still remain focused on earnings reports published by global corporations. Those include today’s Bank of America (expected eps 0,41 USD), tomorrow’s Yahoo (0,09 USD) and AT&T (0,74 USD), Glaxosmithkline and Boeing (1,35) on Wednesday, Microsoft (0,44) and Credit Suisse on Thursday and Ericsson (0,28) on Friday to name only the hottest. Among macroeconomic reports one should stay vigilant before the US homes sales (used on Tuesday and new on Thursday), as well as durable orders (also on Thursday).
The situation is still far from clear on major currency pairs. The euro is failing to record another wave of appreciation, despite the record scored last week. On the USDJPY a support on 102,60 has been conquered last week sparking a sharp rise but today the Japanese currency is on the rise. The situation on the GBPUSD is increasingly mysterious. The British pound not only broke its positive correlation with other European currencies but seems to stepping in the negative correlation territory. It is still too early to judge if it’s a new phenomenon or just a side effect of the resistance slightly above 2,0.
After the “better-than-expected” earning results last week (at least on average) the S&P500 is just under a significant resistance (at 1395 points) and it will take another wave of good news to go through it. So far, investors in Europe seem to doubt in such prospects and cash their profits.
Published on Mon, Apr 21 2008, 10:29 GMT
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Hard to believe?
Fri, Apr 18 2008, 13:09 GMT
by Przemysław Kwiecień
President Jean Claude Trichet would be inconsistent implementing a currency intervention shortly after another set of hawkish statements. Yet it seems hard to believe for financial markets that another wave of euro’s appreciation is possible any soon. On the last Wednesday, the EURUSD scored the new all time high at 1,5977 after “higher-than-expected” CPI in the euro zone. A previous resistance around 1,59 has been conquered and from a technical point of view, a rise to the 1,62 could have been expected. However, subsequent earnings reports showed that non-financials are doing fairly well and even banks are showing some hints of hope. Subsequently, the eurodollar went down to as low as 1,5730 on Friday and the USDJPY reached 104,30 shortly after breaching resistance at 102,60. In the days to come the market will start anticipating the next move of the Fed, with a prospect of 25 bp cut acting in favor of the dollar. The levels of support on the EURUSD are at 1,5650 and 1,5540, although the upward trend is a baseline scenario for as long as we are above 1,5340. The appreciation of the dollar did not help emerging market currencies, including the Polish zloty. The USDPLN scored multiyear lows at 2,1390 but at the end of the week we noticed a clear profit taking with the pair returning to 2,1750 and erasing gains from the first part of the week.
Published on Fri, Apr 18 2008, 13:09 GMT
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The week ahead: inflation and other monthly reports
Mon, Apr 14 2008, 10:27 GMT
by Przemysław Kwiecień
Retail sales figures for March in the US open what is going to be a really hot week on the macroeconomic front. While the sales (expected to slide by 0,6% m/m) is stalling on the tighter personal budgets, the inflationary threat remains in place and market awaits a rise in both consumer and producer prices (by 0,3% m/m and 0,6% m/m respectively). The CPI will be released on Wednesday and the PPI on Tuesday. In Wednesday, on top of inflation data we will see the output data. In that case investors await another drop (by 0,1% m/m) which lack of belief in a rapid recovery – the US output should be the first to benefit from the weaker dollar. We will get a hint of a likelihood of such scenario after the Philadelphia Fed and the NY Fed activity indices due on Thursday and Tuesday respectively.
The consumer prices reports are due also in the UK and Poland (Tuesday, the consensus for the UK CPI is 2,6% y/y and we expect inflation in Poland to retreat to 4,0% y/y) as well as in the Eurozone (on Wednesday – market awaits a confirmation of the initially estimated 3,5% y/y).
While all the macroeconomic reports are crucial for the longer-term judgments, markets will react also to all the earnings reports from the US located companies, as the 1st quarter reports start to reveal the impact of the financial crisis on the broader economy. The bad news from Friday are already reflected in sliding stock markets and while the EURUSD is just under the support lines, the yen might be the winner this week.
Published on Mon, Apr 14 2008, 10:27 GMT
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Outlook (still) unclear
Mon, Apr 14 2008, 08:09 GMT
by Przemysław Kwiecień
In the last week the US dollar lost to all major currencies except the British pound which was under pressure from the BoE’s cut in rates. The dollar lost 0,7% to the euro, 1,7% to the yen and almost 1,5% to the Swiss frank. The outlook – especially on the EURUSD, still remains unclear. Although we had a new record (at 1,5911), its was just a notch above the previous peak from the March 17th and the market clearly was not certain of another appreciation wave of the euro. The data was mixed – higher gap in trade and hawkish ECB supported the euro but the bullish initial claims report plus higher than anticipated rise in import prices were against. It still looks as the demand side did not give up and may try its strength soon. The situation was a bit clearer on the USDJPY, where the resistance at 102,60 proved successful and given a deterioration in moods on the stock markets, the market is looking at the support around 98,60 – 98,80.
Meanwhile, the mood on the Polish forex is more than bullish. The USDPLN was down at a mere 2,1580 and the EURPLN at 3,4150 on Friday, which marked gains (of the zloty) of almost 3% and 2% respectively. Afterwards we saw some profit taking, but the sentiment remains very good as investors await a wave of Polish macroeconomic reports for March which are due next week.
Published on Mon, Apr 14 2008, 08:09 GMT
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Looking for the good news
Thu, Apr 10 2008, 07:37 GMT
by Przemysław Kwiecień
Markets are relatively calm as we approach the second half of the week. Yesterday’s minutes did not influence nor stocks neither the forex in a significant way. On one hand, Fed’s members admitted that the GDP may actually contract but on the other they were still assuming a quite vital acceleration of the GDP dynamics in 2009. We are still awaiting two important rate decisions (ECB and BoE will decide on rates tomorrow), but apart from the GBPUSD currency pair, their impact should be moderate at most. In the meantime investors try to see some hints of hope in a generally grim picture. They liked they idea of the Citigroup shedding some of its illiquid assets, even though the price will most likely be below their fair value. They were also encouraged by the better-than-expected results of Circuit City Stores – an electronic retailer.
As a result stocks in Europe and futures for the US indices are around the surface, shrugging off a sell-off in China caused by the money outflow to upcoming IPOs. The demand on the EURUSD is trying its best but unless something unexpected happens, a consolidation around 1,57-1,5750 may last until the end of the week.
Published on Thu, Apr 10 2008, 07:37 GMT
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About rates − again
Mon, Apr 7 2008, 10:45 GMT
by Przemysław Kwiecień
After another set of the weak US macroeconomic data, investors are focusing on a rate outlook again. Although the Fed will not meet this week, market is awaiting minutes from the last meeting, which are about to be published on Tuesday. Investors are wondering, why the Fed – cutting the reference rate by 75 bp – failed to meet market expectations of 100 bp cut and if members of the Committee might be afraid of further easing because of inflationary threats. The minutes will be followed by the BoJ decision (Wednesday) and meetings in the UK and Frankfurt (Thursday). While the BoJ and the ECB are broadly expected to leave rates unchanged, the Bank of England will probably cut rates by 25 bp.
The rate issues together with the US trade balance for the February (expected at –57,5 bln USD) released on Thursday may influence the moods on the forex market where the dollar is in a fairly good shape. Its enough to say that the US currency is at the same level to the euro and 1% stronger to the Japanese yen when compared to the levels just before the payrolls release (on last Friday). This reflects market’s hesitance regarding plausibility of a further sharp decline in a value of the dollar – at least in the short horizon. This sentiment is also favorable for the stock markets, which shrugged the poor employment reading and are set for a corrective rise – unless the Fed will surprise markets with some hawkish remarks.
Published on Mon, Apr 7 2008, 10:45 GMT
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In consolidation
Fri, Apr 4 2008, 15:58 GMT
by Przemysław Kwiecień
The situation on the EURUSD pair looks really interesting. One could expect that after reaching 1,59 on March 17th, it would be hard for the market to push the euro higher in a effortless manner. Indeed, on Monday 31st the market did try test the maximum and proved unsuccessful. Such an outcome spelled longer consolidation which we may observe for a while. The ceiling lays at 1,59, while a strong line of support is at 1,5350. The pair would be probably heading there if not the payrolls report, which has been weaker again and pushed the pair beyond 1,57. Awkward reaction shows, however, that the market may not be strong enough at the moment to bring new records very soon.
In the meantime, the Polish currency is doing great. Even though the march upwards on the EURUSD has been halted, the currency managed to gain both to the euro and to the dollar as investors look forward to another rate hike.
Published on Fri, Apr 4 2008, 15:58 GMT
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Back to the trend
Fri, Mar 28 2008, 16:37 GMT
by Przemysław Kwiecień
The appreciation of the dollar did not last long. Higher than anticipated Ifo reading and better results from the German companies reflected a relative strength of the European economy and was a major cause for the appreciation of the euro within the last few days. Still, the resistance at 1,5865 on the EURUSD proved successful and at the end of the week we noticed consolidation instead of new records. There seem to be two options for future developments – both assuming a continuance of the EURUSD long term rising trend. Firstly, one could expect another test of previous heights quite soon. On the other hand, some coordinated intervention on the currency market seems increasingly more probable and therefore the second option anticipates some stabilization – perhaps a similar one to the triangle shaped consolidation from November 2007 to February 2008.
The Swiss frank gained too, however more moderately, while the Japanese yen did barely move. This is due to the fact, that moods on the stock markets improved noticeably. On the whole week, the euro gained almost 3% to the dollar and the frank 1,5%. This was also a good week for the zloty. The Polish currency, supported not only by the EURUSD but also by domestic factors like stronger retail sales report and the third consecutive rate hike, strengthened 3% to the dollar and at the end of the week the USDPLN traded just above 2,23.
Published on Fri, Mar 28 2008, 16:37 GMT
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Durables vs. IFO
Tue, Mar 25 2008, 10:36 GMT
by Przemysław Kwiecień
The US durable orders report is sometimes more important just like prices often change purely because of a sentiment on the market. Only because of a one-off surge in those orders in December, the 4th quarter GDP change was above the surface. While the GDP final estimate (due on Thursday) isn’t likely to have a major impact, the report on durables will indicate if we are about to see a drop in the GDP on April 30th when the advance data for the 2nd quarter is being released. The report is released on Wednesday, just like German’s Ifo (a business climate index, which surprised on the upside for two months in a row), expected to slide to 103,5 points and a report on new home sales. The last one will be looked at closely, since investors want to know if the good news from the secondary market (where sales were up for the 1st time in 8 months) is about to be confirmed. The market consensus, gathered before the Easter, anticipated another fall in sales – to 576k annualized. The end of the week will be important in Japan, where data on unemployment, retail sales and consumer prices will be published. Those releases will shed some more light on renewed speculations about the rate cut.
Published on Tue, Mar 25 2008, 10:36 GMT
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A week for the dollar
Tue, Mar 25 2008, 09:55 GMT
by Przemysław Kwiecień
The last week had a clear winner on the forex and it was the US dollar. The US currency gained almost 3% to the euro, 3,5% to the yen, nearly 2% to the British pound and almost 4% to the Swiss frank. There were generally two reasons behind this appreciation. Firstly, the previous appreciation wave of the euro reached 1,59 threshold matching the range of a similar wave in autumn 2007, so some technical correction seemed likely. Secondly, the Fed provided an excuse for such a correction lowering rates “merely” by 75 bp instead of 100 bp expected by the market. However, with the EURUSD hovering slightly above 1,54 at the end of the week and the USDJPY just below 100,00 there are good chances to return to the long term trend of the dollar’s depreciation.
Stronger dollar usually doesn’t spell good news for the emerging currencies from the Central Europe and this week was no different. The Czech koruna lost as much as 4% to the dollar, not least because the government and the central bank gave hints about initiatives aimed at stopping an appreciation of the currency. The Polish zloty proved more resilient, as the local data on wages and output nearly sealed another interest rate hike. The zloty lost 1,7% to the dollar and gained slightly to the euro.
Published on Tue, Mar 25 2008, 09:55 GMT
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EURUSD at its all−time high. What is next? 1.55?
Fri, Mar 7 2008, 08:05 GMT
by Adam Narczewski
Sentiment towards the American currency is still declining. Despite decent news from the U.S labor market and economy, the USD kept declining.
The financial world was waiting was waiting mainly for two decisions today. Both did not surprise as the European Central Bank (ECB) kept interest rates at 4.00% while the Bank of England at 5.25%. More important for the market was the press conference held by ECB’s president, Jean Claude Trichet. Trichet indicated, as he did in his previous announcements, that inflation is hiking pretty quickly in the Euro zone. He said that inflationary risk is “high”. As the main goal of the ECB, its president mentioned price stabilization. At the same time he informed that the ECB raised its inflation estimate to the 2.6% - 3.2% range.
The word were interpreted as “hawkish”. They raised speculation the bank might decide to hike interest rates in order to avoid losing control over inflation. Such expectations affected the EURUSD. Taking into consideration another interest rate cut in the U.S by 25 bp. to 2.50% on March the 18th, the sellout of the “greenback” began. The EURUSD began its quest towards new records reaching 1.5378 as its historic all-time high. Investors might be asking: what is next? There is no clear answer to this question. Very probable seems the EURUSD attacking the 1.55 level. Friday’s U.S labor market report will be crucial. We will see in what condition is one of the most important segments of each economy – the labor market. The 1.55 level seems very probable even on Friday or at the beginning of next week. If bad news will keep flowing from the U.S, including yearly financial statements of American financial institutions, the EURUSD can reach even 1.60 in the second quarter of this year.
Published on Fri, Mar 7 2008, 08:05 GMT
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"The week of central banks"
Tue, Mar 4 2008, 09:43 GMT
by Adam Narczewski
The week ahead of us will bring news that investors were waiting for. Not only the U.S labor market reports are on the spotlight, but this week can be called “the week of central banks”.
Sure, there are macroeconomic reports that should analysts and investors should pay attention to during the first couple of days of the week. On Tuesday, Federal Reserve Chairman, Ben Bernanke, will deliver a speech titled "Reducing Preventable Mortgage Foreclosures" at the Independent Community Bankers of America/Techworld Annual Convention, in Orlando. We expect Bernanke to confirm the 50 basis points interest rate cut planned for the 18th of March, when the FOMC meets. Those betting on the Canadian dollar will pay attention to the Canadian Bank and its interest rate statement. The market expect a 25 basis points cut to 3.75%.
Wednesday is not going to be calmer. We will start the day with the ADP Nonfarm Employment Change report from the U.S where only 10K new jobs are expected (against the previous reading of +126K). Following this report, the U.S will publish a series of economic activity reports including factory orders, unit labor costs, and nonfarm productivity. The one investors are waiting on Wednesday is the ISM Non-manufacturing publication. The previous report (reading much worse than expected) brought markets down. How is it going to be this time? The market expects a reading slightly better than previously. Also, the Beige Book will be published describing the current state of the American economy. Those investors playing on world currencies, should focus on the Australian Trade Balance (AUD) and New Zealand’s central bank interest rate statement (NZD – no change from the current 8.25%).
Thursday is the central bank’s day. Both, the European Central Bank (ECB) and the Bank of England (BoE) are expected to keep interest rates at 4.00% and 5.25% respectively. Europe seems not to follow the Fed in their interest rate cuts quest. As usual, ECB’s president, Jean-Claude Trichet, will hold a press conference following the bank’s decision. More important than the decision itself will be what Trichet has to say regarding future monetary policy of the ECB. At night, the Bank of Japan’s decision is also expected (no change from 0.5%).
This is how we arrive to Friday. All anxious waiting for the labor market report from the U.S. The markets forecasts an unemployment rate increase from 5.8% to 5.9% but on the spotlight, as usual, will be nonfarm payrolls publication. According to analysts, 25K new jobs were added. That is certainly an improvement from the 17K drop last month.
Certainly, it is an interesting week ahead of us. A week for investors with strong nerves.
Published on Tue, Mar 4 2008, 09:43 GMT
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Currency and Stock Markets Weekly Outlook
Mon, Feb 25 2008, 11:47 GMT
by Adam Narczewski
The upcoming week will be rich in macroeconomic publications. The most important will be published of course in the United States, but investors should not underestimate the reports being published in the Euro zone.
Markets are volatile and react strongly to any information. Already on Monday we get the first bomb – the U.S existing home sales report. Analysts expect a 1.8% decline. This report is crucial since it shows the condition of the housing market – the one that “caused” the global crisis. On Tuesday, investors will need to pay attention to the German Ifo Business Climate Index and the U.S PPI inflation report. Analysts expect the producer’s prices will increase by 0.4% while they dropped by 0.3% last month. Another sign that inflation is speeding up in the U.S. We will also see how consumers feel about the current economic situation. Consumer confidence, prepared and published by the Conference Board, is expected to drop to 82 from 89 points.
Interesting things will be going on during the rest of the week. On Wednesday, we start with the U.K’s GDP report. The rest of the day we will need to focus on the U.S market. The Core Durable Goods are forecasted to decline by 1.4%, a drop from last month’s 2.3% increase. Another report from the housing market series, New Home Sales, is expected to show only a 0.7% decline. Maybe the U.S housing market situation is stabilizing and soon we will see increases? Important for the markets will be the speech that Bernanke will give. Federal Reserve Chairman will testify about the Monetary Policy Report before the US House of Representatives Committee on Financial Services, in Washington DC. On Thursday, Fed’s Chairman will continue to testify, this time before the Senate Committee on Banking, Housing, and Urban Affairs, in Washington DC. Less important but also worth attention will be European Central Bank’s President, Jean-Claude Trichet, speech at the Willem F. Duisenberg Lecture organized by the Nederlandsche Bank and the Netherlands Institute for Advanced Study, in the Netherlands. Also on Thursday, the U.S preliminary annualized GDP and GDP Deflator will be announced.
Instead of getting ready for the weekend, on Friday investors will need to follow financial news. In the Euro zone, the CPI and Consumer Confidence reports will be published. From the U.S, investor will await the Personal Spending, Personal Income and Core PCE Price Index. Also, the revision of the University of Michigan Consumer Sentiment publication will announced.
For Polish investors the most important event will be the Monetary Policy Council (MPC) meeting that starts on Tuesday and the interest rate decision being announced on Wednesday. Will the MPC decide to hike interest rates? The market expected no change from the current 5.25% but recent events might change the MPC’s strategy. CPI inflation grew to 4.3%, way over the 3.5% limit established by the national central bank. Also, wages and retail sales are growing fast, causing inflationary pressures. The decision will be important for the Polish currency. Since the beginning of the week, the Złoty is gaining against the euro and the dollar. It seems the market is discounting the interest hike by 25 basis points.
Published on Mon, Feb 25 2008, 11:47 GMT
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Weekly Currency Brief
Fri, Feb 22 2008, 15:07 GMT
by Adam Narczewski
The past week was rather poor in macroeconomic reports but those that were published had a big impact on the currency market. Investors were impatiently waiting for Wednesday’s U.S inflation report. According to it, Core CPI inflation increased to 0.3% on a monthly basis against the forecasted 0.2%. On a yearly basis, inflation increased to 4.3% spurring discussion that another interest rate cut in the U.S would dangerously let inflation to increase. In the short-term, the USD gained but the trend was changed on Thursday when the Philadelphia Fed Index showed a reading of -24, the lowest in 7 years. It means that there is still danger of recession and a 50 bp. interest rate cut seems a must. Throughout the whole week, the EUR/USD increased from $1.4630 to $1.4840.
The Polish currency is still on the rise not only because of a weakening dollar. Tuesday’s publication showed that PPI inflation increased to 2.8% on a yearly basis against the forecasted 2.3% increase. At the same time, industrial production grew by 10.8% while analysts forecasted only a 6.6% increase. Such news were a surprise to the market and brought back the discussion that an interest rate hike in Poland will be necessary much quicker than the market expected. Inflationary pressures are strong (increasing wages, growing economy, higher prices) and a 25 bp. interest hike is possible even in March. The Złoty gained against the major currencies: the USDPLN declined from zł.2.4450 to zł.2.4020, the EURPLN from zł.3.5790 to zł.3.5650 and the CHFPLN from zł.2.2260 to zł.2.2105.
Published on Fri, Feb 22 2008, 15:07 GMT
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Currency and Stock Markets Weekly Outlook
Mon, Feb 18 2008, 07:20 GMT
by Adam Narczewski
Last week was rather poor in macroeconomic reports but those that were published moved the markets. The upcoming week can be similar.
Equity markets investors were glad to hear Fed’s Chairman, Ben Bernanke, words that the U.S central bank would do anything to avoid recession. That means further interest rate cuts. Stocks rallied but were stopped on Friday by a dramatic drop of the University of Michigan Consumer Sentiment Index. What will the upcoming week bring us?
Due to the President’s Day holiday, no macroeconomic news are expected from the United States. Stock exchanges will be closed for the day. Interesting things will be going on in Canada though. Mark Carney, the newly appointed Bank of Canada’s Governor will deliver a speech entitled “The Implications of Globalization for the Economy and Public Policy" at the British Columbia Chamber of Commerce and the Business Council of British Columbia, in Vancouver. Investors playing on the CAD will certainly need to pay attention to what the new governor has to say, maybe in regards to the future monetary policy of the Canadian central bank. Tuesday will be poor in macro publications. Again, Canada will be on the spot with the CPI report. Also, minutes from the last monetary policy meeting will be published in Japan.
Wednesday will bring reports that investors’ hearts should beat faster. We will start the day with the UK Monetary Policy Council minutes from their last meeting, where interest rates were kept unchanged at 5.25%. But for he first time this week, the U.S will be back on the scene. With great attention investors will await the CPI publication. Also important will be FOMC meeting minutes. In my opinion we should focus on the U.S housing market reports being published that day – housing starts and building permits. I am one of those that is looking for signals that the housing sector is finally rebounding. I am pretty sure that it is not going to happen so soon, but I want to see some improvement. Good news from the U.S housing sector can bring optimism back on the financial markets.
The end of the week will be less nervous. Some emotions can cause the British retail sales publication or Governor’s Fukui (head of Bank of Japan) speech at a business seminar in Tokyo. I would rather pay attention to the U.S crude oil inventories report. Prices of oil seem to be very sensitive to this publication recently. Also worth attention will be the U.S unemployment claims publication. The American labor market is in a small crisis right now so this report can have some effect on the markets. On Friday investors can be getting ready for the weekend since the only publication I would pay attention to would be the Canadian retail sales. Plenty of news from Canada this week eh?
As for polish investors, they will need to follow global news. Those and mood investors determines the movements of domestic equities and the Złoty. Tuesday will be the only day that reports from the domestic market will be published. At 14:00 CET the PPI (expected drop to 2.3% from 2.5%) and the Industrial Production (forecasted increase from 6.2% to 6.6%) reports will be announced. We will see how the Polish economy is doing. In my opinion, not so bad as some are thinking. Just the influence of global economic events (and what follows, investors mood and risk aversion), that the stock market and the Złoty react stronger to those rather than to domestic macroeconomic publications.
Published on Mon, Feb 18 2008, 07:20 GMT
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Weekly Currency Brief
Fri, Feb 15 2008, 16:02 GMT
by Adam Narczewski
The Polish currency remains under a strong influence of the eurodollar market. This past week the American currency lost ground. Due to the lack of important macroeconomic publications, investors focused their attention on Ben Bernanke’s speech in front of the Senate Banking Committee. Fed’s Chairman confirmed that the situation on the financial markets remains tough and the Fed will take all necessary steps to avoid recession. The interpretation of those words is simple – the FOMC will cut interest rates on their March meeting probably by 50 basis points to 2.50%. Such perspectives lifted the EUR/USD to $1.4670 on Friday while it was still quoted at $1.4495 at the beginning of the week.
The Polish Złoty gained on the weakness of the dollar but other factors also influenced the national currency. Decreasing global risk aversion made emerging markets more attractive to investors. Stock indices rebounded after a period of declines causing the Złoty to strengthen. The big news came on Friday with the CPI publication. Inflation in Poland grew to 4.3% (4.1% forecast) on a yearly basis, which way above the 3.5% upper limit set by the central bank. The report brings back the discussion about another interest rate hike by the Polish MPC. Throughout the course of the week, the EUR/PLN declined from zł.3.6270 to zł.3.5810 while the USD/PLN dropped from zł.2.4930 all the way to zł.2.4405.
Published on Fri, Feb 15 2008, 16:02 GMT
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Currency and Stock Markets Weekly Outlook
Tue, Feb 12 2008, 16:09 GMT
by Adam Narczewski
It seems that the financial markets are slowly stabilizing. It does not mean that macroeconomic publications cannot move the markets.
The upcoming week will bring less reports than the last one but there a couple that investors should pay attention to. On Tuesday, UK’s CPI will be on the spot. Inflation in the UK is expected to jump to 2.3% on a yearly basis, which over the 2.0% target established by the Bank of England. Following that important will be Wednesday’s BoE Inflation Report. The Bank of England (BOE) Inflation Report provides detailed economic analysis and an assessment of inflation over the next two years. Worth attention will also be American’s Core Retail Sales publication and Japan’s GDP.
Thursday will be more exciting. Investors await Canadian and U.S Trade Balance reports. More important will be speeches given by Fed’s Chairman, Ben Bernanke, and European Central Bank’s President, Jean-Claude Trichet. Federal Reserve Chairman Ben Bernanke, along with US Treasury Secretary Henry Paulson, will testify about the US economic outlook and financial markets before the Senate Banking Committee, in Washington DC. European Central Bank (ECB) President Jean-Claude Trichet will deliver a speech titled “Globalization and monetary policy” at the CREA joint venture, in Barcelona. During the night between Thursday and Friday, interest rates in Japan will be announced. Analysts expect no change from the current 0.5%. Bank of Japan (BOJ) Governor Toshihiko Fukui will hold a press conference in Tokyo following the Monetary Policy Committee (MPC) interest rate announcement. The MPC's announcement is void of commentary, so traders look to Fukui's press conference for clues on future monetary policy action. Friday will finally bring some more news from the U.S, with the TIC Net Long-Term Transactions report and the University of Michigan’s Consumer Sentiment publication.
Polish investors as usual will follow news from abroad since the reaction of the market to those is much bigger than to local publications. Nevertheless, I need to mention a couple of reports that will be published the upcoming week. On Tuesday, the Current Account level will be announced. Thursday will bring the M3 Money Supply report while on Friday the most important publication for Polish investors, the CPI. Analysts forecast an inflation level of 4.0%, no change from the previous month.
Published on Tue, Feb 12 2008, 16:09 GMT
Archive
- The U.S still decides
Published On Fri, Oct 17 2008, 14:37 GMT - Markets have not been so nervous since a very long time
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Published On Mon, Sep 15 2008, 07:54 GMT - Volatility increased
Published On Fri, Sep 5 2008, 15:07 GMT
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