Afternoon analysis 27.04.2015:
Focus shifts to the developments concerning Greece as the economic calendar is empty. The EUR/USD hovered near its previous close. The zloty posted significant gains against all its major pairs.
After three months of negotiations with the international creditors Greece has not moved closer to the final agreement. The Eurogroup meeting in Riga last Friday did not yield any positive outcomes and the atmosphere during talks was nervous. The European politicians blamed the Greek minister of finance, Yanis Varoufakis, for the situation.
During the last weekend, two opinion polls revealed that the Greeks are tired with the current situation and are willing to make some concessions to the European partners. Thus, the ability to predict the situation is getting more valuable than some possible gains resulting from a stiffened stance against the international creditors. Moreover, Greeks gave a clear signal that they are willing to remain in the eurozone.
The recent opinion polls and negative comments after the Eurogroup meeting in Riga resulted in the decision to remove Yanis Varoufakis from the negotiation table. The talks on a daily basis will be conducted by the deputy finance minister, Euclid Tsakalotos. Varoufakis’ role will be limited to the political supervision of the talks.
The decision was positively welcomed by the Greek financial market. In the second part of the day, the stock market in Athens exceeded gains above 4 percent. In addition, the positive sentiment was also present in the bond market, where the yields on the government papers dropped significantly. However, although the impact of the situation on the major currency pair was rather limited, the stock market was pleased. The German DAX index posted an increase of about 2 percent.
In turn, the information that the Greek government will run out of money within two weeks from the German media has not affected the market. The information from Bild newspaper that was cited by major media was not visible in the EUR/USD market.
Very good sentiment in the broad market paved the way for a stronger zloty. The Polish currency posted gains against all its major pairs. What is important, after a brief pause, the EUR/PLN returned below the 4 zloty level.
The removal of Yanis Varoufakis is not only a symbolic fact, but it also has practical consequences. This move increased the probability that the final agreement will be reached sooner rather than later. This factor will result in strengthening the appetite for risk assets. Given the situation, the zloty may be stronger, not only in the short term, but also in the long term when the agreement with Athens will finally be reached.
Nevertheless, the Federal Reserve is a risk factor for the zloty. Given the recent weakness of the economic data from the US, the decision on interest rates on Wednesday is very important. If the Fed will confirm the view that the first interest rate hikes has been shifted to later this year, the zloty may be strengthened. Thus, the data on GDP growth may affect the market (more on the expectations before the release in the morning commentary).
If the Fed is not worried by the weakness of the economy, the risk appetite will be limited. The second scenario is less likely to happen, thus, the zloty remains in a position to extend gains, especially against the euro.
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 Cinkciarz.pl Sp. z o.o is prohibited.
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