Daily analysis 05.05.2015

, author:

Piotr Lonczak

The euro increases its drops due to the lack of positive information from Greece, and before the publication of crucial data from the USA. Zloty remains quite stable before the Monetary Policy Council summit.

Last week, the common currency recorded an increase up to the highest level from the end of February. The rate of EUR/USD has even crossed the level of 1.12 dollars. However, the euro has lost on its value since the beginning of the week. Its luck has been broken by the anxieties concerning the future of Greece, and the speculations that the slowdown of the American economy is only temporary.

Data from the other side of the ocean

Last week's upward movement of EUR/USD, has been fuelled by the weak data from the American economy. The data about GDP were especially disappointing. It has slowed down to barely 0.2 percent in annualized presentation. It was definitely a higher result than the anticipated 1 percent. On the other hand, from October until December 2014, the American economy was growing at a tempo of 2.2 percent. Thus, this slowdown range was very crucial.

The next data were also disappointing. The ISM index – the most important indicator of the business cycle on the other side of the ocean – did not match the analysts' expectations. The regional indexes were also disheartening – the ones from Richmond and New York, were worse than expected.

The responsibility for the weak data, has been blamed on the severe winter. Thus, the forthcoming days are so important – the data concerning the labour market will be presented then. Last week's reports about the employment situation (the data about the newly unemployed), were the best in 15 years. It suggests, that the slowdown was only temporary.

Thus, if the reports from the forthcoming days will be coherent with expectations, the drops on the EUR/USD pair will become bigger. On Wednesday we will receive the ADP report, on Thursday – the weekly data about the unemployment, and on Friday the report from the labour market. According to expectations, the data from the Labour Department will show, that the employment in the non-agricultural sector has grown to 220 thousand.

Greece without an answer

Last week, there were speculations about signing the agreement between Greece and its international creditors before last Sunday. However, this term has been postponed. Firstly, there was an idea to set it for Wednesday, but now the goal is to finish the matter of negotiations by May 11th. The eurogroup will meet on that day, and they will be able to make a decision about aid.

Both sides of the negotiations assure, that progress has been made. At the same time, Greece intensifies the discussions to high levels. Today, the Greek vice-prime minister Yannis Dragasakis will speak with the EBC chairman, Mario Draghi. On the other hand, the minister of finance Yanis Varoufakis, will have a meeting in Paris with his French equivalent Michel Sapin, and the UE commissioner Pierre Moscovici.

The date of May 11th is very important. The following day Greece has to pay their debts to International Monetary Fund. The representatives of Syriza have recently admitted, that although their country intends to respect their obligations, it will be a very difficult task without some extra money.

The stable zloty

The zloty is quite stable before the summit of Monetary Policy Council. The Polish currency loses significantly only in relation to the dollar. This is a consequence of the American currency's strength on the wide market.

If the MPC expresses a concern with the strong zloty on tomorrow's summit, the Polish currency can be overvalued. However, the recent comments from the Polish monetary authorities, suggest that such a solution is very unlikely. Thus, the MPC summit should not have an impact on the evaluation of the Polish currency's perspectives. Due to this, the zloty will remain in the position for appreciation. Further enforcement of the zloty however, will be dependant on the sentiment towards the hazardous assets.

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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