Afternoon analysis 02.06.2015

, author:

Piotr Lonczak

Rumors Greece is getting near to a deal with country's international creditors helped the euro. Earlier, the common currency was strengthened by the inflation data. The zloty exploited the improvement in the market sentiment.

On Tuesday the speculations concerning Greece intensified. The information agencies said the leaders of France and Germany met with Greece's creditors in Berling last night. The talks resulted in a common proposal for the Greek government, that would pave the way for a final agreement.

The nation is expected to pay the 300 million euro International Monetary Fund bill due on Friday. Currently no one knows whether Athens will have enough funds to meet the IMF obligation. Thus, the involvement of the major European officials in the negotiation process has been considered as a measure to pressure both sides. The euro moved up due to the expectation a deal will be signed soon.

Moreover, the common currency exploited today's data on inflation. Eurostat said the inflation growth stood at a positive level for the first time in six months. In May, the inflation rate was 0.3 percent – more than the plus 0.2 percent that was projected. In addition, the core inflation rose to 0.9 percent, the highest level in nine months.

Today's data has limited the deflation risk in the euro zone. This factor has negatively affected the bond market. Investors sold bonds from the core euro zone countries and from the countries facing fiscal problems. As a result, the expectations for interest rates have to be adjusted up.

Later, there were more news regarding the Greek standoff. Firstly, the Eurogroup Chief Jeroen Dijsselbloem said the final agreement is still very far. Moreover, the Berlin meeting decisions were revealed. It was specified that Greece has time to Wednesday to assess the proposal. And Athens submitted its own reform plan.

As a result, the EUR/USD gave away some of its earlier gains. The major currency pair remained relatively high today.

A stronger zloty

The expectations that the end of the Greek crisis is close helped risk assets. This factor strengthened the zloty, which was up against all its major pairs except the euro.

The Monetary Policy Council is expected to leave interest rates unchanged on Wednesday. The decision will rather not affect the zloty, which is currently under the influence of the broad market sentiment. An interesting topic is the rumor that the National Bank of Poland President Marek Belka would resign, however it is not important for the Polish currency.

If the information concerning Greece are positive, the zloty will be strengthened due to improvement in the sentiment. A similar scenario will allow the Polish currency to extend gains against all its major currencies.

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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