Afternoon analysis 09.06.2015

, author:

Piotr Lonczak

The anxiety regarding the Federal Reserve plan to rise interest rates undermined the market sentiment. The dollar resumed its gains. The zloty gave away some of its earlier gains in the second part of the session.

Focus shifts to the developments concerning Greece and the expectation for interest rate hikes in the United States as the economic calendar is empty.

The reports from the US increased the probability that the Federal Reserve will increase interest rates rather sooner than later. The report on employment change in the non-farm sector showed that companies added as much as 280k new workers. Clearly, a result above 220k that was expected.

Nevertheless, a broader look at the US economy reveals, that the major world economy is struggling. After deterioration in the economic situation at the beginning of the year, now the economic reports are mixed. Solid readings from the labor market have intertwined with poor GDP result and at most meager sentiment indexes.

Given the situation, the September term in the most likely as a start of interest rate hikes by the Fed. The Federal Open Market Committee meeting scheduled next week may bring some better view on the central bank's plan.

Still, the expected policy tightening creates an unfavorable environment for risk assets. As a result, the zloty and other emerging market currencies were pressured.

Greek uncertainty

The Greek government showed today its own plan on budget financing and reform schedule. Still, it is not very likely that the proposal will be accepted by the international creditors.

Greece is willing to use money from the European Stabilization Mechanism to repay the European Central Bank. Moreover, the nation wants the Frankfurt-based institution to remove ban on treasury bills issuance (more on the matter in our morning commentary).

Earlier today, the German Finance Minister, Wolfgang Schaeuble, repeated that his view on the situation is different form its Greek counterpart Yanis Varoufakis. Yesterday, the German Chancellor Angela Merkel warned that there was not much time left for a debt deal. The Berlin government chief said also, that although the European countries are willing to help Greece, the nation must respect its commitments.

After rebound on Monday, the EUR/USD returned to declines. Yesterday rumors that the US President Barack Obama expressed an anxiety concerning a strong dollar supported the major currency pair.

Zloty pressured

The Bank of Russia canceled interventions in the currency market on the last Friday. The information helped the rubble to recoup some recent losses. Moreover, the Russian currency was helped by rising oil price. Still, the rubble remained at a very low level against the dollar.

The zloty remained under the influence of the adverse market sentiment. The Polish currency was pressured due to rising risk aversion in the market as the Fed was on track to raise interest rates. Moreover, the latest report from the Polish economy were rather negative. Given the situation, the zloty will remain prone to losses.

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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