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Daily analysis 03.06.2015

, author:

Marcin Lipka

The agreement between Greece and its creditors is coming closer. The dovish speech of Leal Brainard, a member of the American Federal Reserve. Will Draghi reveal the secrets of the recent meeting with the creditors? The zloty remains stable in relation to the euro. The franc and the dollar are clearly cheaper.

Most important macro data (CET). Estimations of macro data are based on Bloomberg's information, unless marked otherwise.

  • 13.45: The decision about the EBC's interest rates (still on the level of 0.05%)
  • 14.15: Data from the labour market published by the ADP (estimations: +200 thousand)
  • 14.30: Mario Draghi's press conference after the EBC summit
  • 16.00: The ISM index from the American industry (estimations: 57 points)
  • 16.00: Marek Belka's press conference after the MPC summit

Is the deal getting closer?

Yesterday's session went under the sign of speculations regarding the matter of the Greek agreement. Although the market initially presented a sceptical approach towards the creditors' recent meeting in Berlin, it has eventually been interpreted as a good sign.

The inflation data from the eurozone, which were higher than expected also helped the increase of the EUR/USD. The rising of the consumer prices, excluding fuel and food, can be a positive signal for the European economy to exit the stagnation. The records of the main currency pair were also influenced by the profitability of the German bonds. It only confirms that the danger of low inflation in the eurozone has decreased.

It was, however, the hazardous forces that had the most to say. The fear of the investors buying francs and dollars, caused them to begin reducing short positions on the European currency. This was the reason for visible growth on the EUR/USD and EUR/CHF.

Getting back to the matter of Greece, the chances for coming to an agreement have really increased. A common standpoint of the creditors assumes that the details established in the work groups will probably be the last. And though they may still be modified, the standpoints of both sides have most probably become even closer.

It has been confirmed by the information from Volkskrant, which was quoted by Bloomberg. The Dutch daily newspaper writes that the creditors agreed on reducing the initial budget surplus (before the cost of debt's service) up to 1%. This is a significant compromise in comparison to the original plans in which the assumed surplus was on the level of 3%. Volkskrant also claims that Greece will have to lower retirement pensions, decrease the restrictions regarding employee dismissal, or the privileges of some occupational groups. Athens will probably agree to these terms, apart from the reform of the pension system.

In conclusion, there is no doubt that an agreement between Greece and its creditors is at its closest since February. However, it cannot be excluded that Syriza will try to play it with its society. Thus, the signing of the proper documents can be extended. But in general, the matter of Greece is on the right path to exit the financial headlines and stop influencing the market.

Dovish voice from the Fed

Despite the fact that Leal Braindard was assigned to the Federal Reserve one year ago, we still haven't heard her state any specific opinions about the monetary policy. Until yesterday. On Tuesday, it appeared that the former under-secretary of the State Department has relatively dovish viewpoints.

Braindard indicated that the weak condition of the American economy from the first quarter, can be something more than just an effect of a severe winter. She also refers sceptically towards the spring macro data, which do not suggest “a significant rebound”. The Fed's representative also points out the strong dollar, which impacts negatively on the results of export, or perspective of inflation. Additionally, the lower prices of fuel against all predictions, do not translate to the consumers' higher expenses for other goods or services.

Braindard, however, confirmed that the increase of the interest rates can still be announced this year. But her whole statement makes one consider her as an opponent of tightening the monetary policy in September.

Few words about the foreign market

Today, Prime Minister Tsipras will meet the chairman of the European Commission in Brussels. Statements that will appear after those discussions should give a clearer signal on how Athens receive the creditors' offers. If the Greek standpoint comes closer to the one presented by the Troika representatives, one can assume that the case of Greece is coming to an end.

Apart from the matters related to Greece, the ADP publication (+200 thousand) and the ISM reading (57 points) are worth paying attention to. A worse reading should clearly overvalue the American currency. The investors should pay as much attention to the press conference of Mario Draghi. It cannot be excluded that the EBC chairman will reveal some details from the meeting in Berlin, and refer optimistically to the economic situation in the eurozone. Thus, if we do not see any exceptionally good data from the other side of the ocean, the dollar should be under pressure and the EUR/USD will probably keep the majority of the “territory” gained yesterday.

Stable zloty. Cheaper franc

A big variability on the global currency market was received calmly by the trade participants on the EUR/PLN. The investors had to estimate to what degree the positive influence of the improving Greek situation on the zloty, is being reduced by the increase of the European bonds' profitability. As a result, we remained close to the current levels. However, they should still be considered as quite high, by looking at the EUR/PLN pair.

One should not expect too much from today's summit of the MPC. The economy is following the course established by the NBP a few months ago, and the maintenance of the interest rates on the same level until the end of the year, is still a base scenario. Perhaps there will be some questions regarding current non-economic events (current chairman's tenure, matter of parliamentary elections). However, they should not have a bigger impact on the PLN.

Less tension regarding Greece, and the increase of the inflation in the eurozone have helped the EUR/CHF pair. This translated to the decrease of the CHF/PLN by a few zloty cent. If the agreement with Greece occurs the CHF/PLN should move to the area of 3.90.

Anticipated levels of PLN according to the EUR/USD rate:

Range EUR/USD 1.1050-1.1150 1.0950-1.1050 1.1150-1.1250
Range EUR/PLN 4.1000-4.1400 4.1000-4.1400 4.1000-4.1400
Range USD/PLN 3.7000-3.7400 3.7400-3.7800 3.6600-3.7000
Range CHF/PLN 3.9600-4.0000 3.9600-4.0000 3.9600-4.0000

Anticipated levels of GBP/PLN according to the GBP/USD rate:

Range GBP/USD 1.5250-1.5350 1.5150-1.5250 1.5350-1.5450
Range GBP/PLN 5.6600-5.7000 5.6400-5.6800 5.7200-5.7600

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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