Afternoon analysis 13.08.2015

, author:

Piotr Lonczak

The US reports supported the dollar. A positive surprise from the Greek GDP. The European Central Bank sees couple warnings for the eurozone economy. The zloty declined against the dollar.

Surprisingly, the Greek GDP posted growth in the second quarter. The economy expanded 0.8 percent against the previous quarter - a better result than the negative 0.5 percent that was forecast. On a yearly basis the growth stood at 1.5 percent.

In spite of today's reading the overall situation of the Greek economy is negative. Capital controls were imposed in the end of June, thus the second quarter GDP data had not included their impact. The period, when banks were shut, negatively influenced the economy.

Moreover, doubts mount over the bailout program for Athens. The agreement signed in the beginning of the week should have paved the way for an imminent final deal on bailout. Instead, there has been rising critique of the deal, especially from Germany. Nevertheless, the risk is minimal that the Greek government will not obtain financial support and miss the ECB payment due on 20 August.

ECB sees couple problems

The minutes from the European Central Bank 15-16 July meeting showed that the monetary authorities see couple problems.

In July, the Frankfurt-based institutions saw the Chinese stock market turmoil as a potential threat. In that period the Shanghai stock index plunged (about 20 percent) and the Chinese authorities intervened to tame declines. The second source of risk is the Federal Reserve that is going to raise interest rates, a move that may negatively affect emerging market economies.

Currently China and the United States are still the major sources of risk. The People's Bank of China decision to devalue the yuan jolted the emerging market currencies and increased volatility in the major stock exchanges. The Federal Reserve will likely take the developments in China under consideration, when it will decide on interest rates in September. The situation will worsen, if the yuan slide continues.

Dollar increased on data

Retail sales in the US slightly exceeded the forecast. The overall report showed a 0.4 percent increase - in line with expectations. However, the numbers excluding auto sales showed a 0.6 percent growth - more than the forecast. Moreover, the numbers from the prior month were revised up. The report on unemployment claims was in line with the forecast - a sign that the labor market expansion is still strong.

Solid reports from the US and the People's Bank of China statement aimed on stabilizing the yuan increased the likelihood the Fed will raise rates in September. As a result, the dollar gained.

Surprising reports

Today's reports from the Polish economy were surprising. The deflation was smaller than the forecast. In July the inflation rate stood at minus 0.7 percent against minus 0.8 percent that was expected. In contrast, the current account report missed the forecast. The balance stood at minus 849 million euro against the 80 million euro that was forecast. In the preceding month the surplus was at 1.2 billion euro.

However, the report did not affect the zloty. The Polish currency remained under the influence of the broad market. Rising probability of interest rate hikes in the US is a factor that is pressing the zloty down against the dollar. However, the euro dropped.

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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