Afternoon analysis 01.07.2015

, author:

Piotr Lonczak

A solid ADP report strengthened the dollar. Greece's future remains vague in spite of the new offer from Athens. The zloty was quite stable. Only the dollar posted some gains against the Polish currency.

The Greek Prime Minister Alexis Tsipras expressed readiness to accept the latest offer from creditors. However, he has made some changes to the initial proposal. Basically, expected concessions were regarding the pension system reform (a longer adjustment period for the poorest pensioners) and the tax reform (to keep an exception of tax for the Greek islands). The Syriza government is willing to accept the 2012 pension system reform plan.

Moreover, they agreed to cut military spending by 400 million euro. Nevertheless, the plan will be implemented in 2017, but not this year as expected by the international creditors.

The behaviour of the Greek government is getting less coherent. The referendum proposal is not credible if the government is going to now accept any deal.

Germany is against

Nevertheless, the Greek proposal was dismissed. The German Chancellor Angela Merkel said that there will be no deal before the referendum. In addition, the German Finance Minister Wolfgang Schaeuble once again criticized the Greek government. However, the French President Francois Hollande was not as severe and talked today about the need of a compromise.

As a result, the latest polls will be quite important in the coming hours. Today, the poll published by the Efsyn newspaper showed that the majority of Greeks is against the austerity plan (more in our morning commentary). If the Greeks agree to the program, the likelihood for a compromise will rise. In the opposite situation, the Greek position will be very complicated. Nevertheless, the German Finance Minister said yesterday that Greece will remain in the eurozone even if the referendum result is negative.

Solid reports

Today's data from the US were quite positive. The ADP report on employment change in the private sector exceeded the forecast. The reading showed a 237k increase against the 220k forecast.

It was a positive premise before the coming data from the labor market. On Thursday, monthly data on the employment situation are scheduled. The forecast is for a 230k increase. If the result is near that level, the scenario for rate hikes in the US will be strengthened.

Other reports also supported the dollar. The PMI report for manufacturing sector was better than projected. Moreover, the dollar was supported by the ISM report. The major sentiment index in the US increased to 53.5 - more than forecast. Also, the construction spending report was above the forecast.

As a result, the EUR/USD exceeded the recent drop. The move was supported mainly by the US data. Investors are less focused on the Greek developments. The credibility of information coming from Athens is not very good. Moreover, key European politicians are going to wait with any decisions until the vote on Sunday. As a result, it is not very likely that any breakthrough will take place.

Stable zloty

The Polish currency was quite stable today. The only exception was the dollar. The US currency posted gains against the euro. The dollar move was due to the economic reports.

Today's PMI report, that exceeded the forecast, did not help the zloty. Thus, the Polish currency will remain under pressure as long as the Greek crisis is not concluded.

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 the written permission from Sp. z o.o is prohibited.

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