Afternoon analysis 16.07.2015

, author:

Piotr Lonczak

Greece will receive 7 billion euro bridge financing. The ECB raised the ceiling on the emergency cash available for Greek banks. Mario Draghi sees no chance for Greece to miss its next payment. The zloty supported by risk appetite.

As expected, the European Central Bank did not change the level of interest rates. The main rate was kept at plus 0.05 percent and the deposit rate at minus 0.2 percent.

During the press conference, the ECB President Mario Draghi said the Frankfurt-based institution decided to increase the level of emergency liquidity for Greek banks. The limit was raised by 900 million euros. The ECB chief explained, that the decision was possible to make as the Greek government has fulfilled its commitments stemming from Monday’s agreement with creditors.

Mario Draghi reiterated that the ECB operates on the basis of an assumption of the eurozone integrity. The Frankfurt-base institution does not take into account a Greek departure. The ECB president, when asked about the risk of Greece missing its next ECB payment, said as far as he knows, there is no similar risk.

Draghi assesses the impact of the Greek crisis to be limited to the financial markets. The ECB has not noticed any deterioration of monetary conditions. However, if the central bank sees a negative impact, it will take appropriate actions.

Eurogroup gives money

The eurozone finance ministers approved the bridge financing for Greece. In the statement, it was stressed that the Greek government has respected its obligations stemming from Monday’s agreement. The final step will be taken tomorrow, when the national parliaments will decide on the money disbursement.

As a result, the nation will receive 7 billion euros, which will allow the government to meet its financial obligations in the near future. The major payment is the ECB debt to be paid on 20 July. Moreover, the nation has outdated payments due to the International Monetary Fund.

The very first step has been made to pave the way for a three-year bailout program. Yet, there is still a lot of work to be done. On Friday, the Bundestag will vote on the financing approval, which poses some risk as Germany has severely criticized Greece.

In the long term, an important fact is that a significant part of the Syriza party voted against the reform bills. As a result, Prime Minister Alexis Tsipras has lost some power, which may push him to seek a coalition with the opposition or to decide on a snap election. His power will be tested soon, as the next part of the bill has to be accepted by 22 July.

Stronger zloty

On Thursday, the zloty extended gains against the euro. The EUR/PLN dropped near 4.10 zloty - to the lowest level since the beginning of June. The zloty increased against the dollar, the pound and the Swiss franc.

The data from the Polish economy missed the forecasts. Employment growth stood at 0.9 percent in June, a lower pace than in the previous month and below the forecast. Similarly, the report on wages did not meet expectations. Moreover, the core inflation data was also below the forecast. It decelerated to 0.2 percent from the 0.4 percent in the previous month and against the 0.3 percent that was forecast. On Friday, data on industrial production and retail sales are scheduled. However, given the latest poor reports, it is unlikely that the data will support the zloty.

The zloty remained under the influence of risk appetite. The Polish currency may extend gains as the Greek crisis impact will be limited. However, the hawkish stance of the Federal Reserve will limit the appreciation potential.

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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