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Daily analysis 07.05.2015

, author:

Piotr Lonczak

The EUR/USD pair is waiting for the next information concerning the American labour market. Increase of aversion towards risk touches the zloty. Sale of bonds has forced the ministry of finance to cancel the debt's auction.

On Wednesday, we saw a very strong enforcement of the zloty in relation to the dollar. This movement has been caused by the data from the American economy. The ADP report about the shift in employment in the private sector, has indicated that the companies have increased the number of their employees only by 169 thousand. This result was definitely worse than the prognoses.

The weakness of the American labour market, has proven that the slowdown in the first quarter can not only be excused by the severe winter. Thus, it was not temporary and therefore, can last for a longer time.

The EUR/USD pair is stable during today's session. It is due to the fact, that the market is waiting for the next data from the American labour market. A report about the newly unemployed will be published today. If it does not meet the expectations, the dollar will be even more overvalued. The expectations assume the results amounting to approximately 280 thousand.

Tomorrow, on the other hand, a monthly report about the situation on the labour market will be presented. According to expectations, the employment in the non-agricultural sector will increase by over 220 thousand. In the context of very weak data from recent reports, it is difficult to expect that those data will be able to support the dollar.

Weak data from the United States move the expectations further concerning the first increases of interest rates by the Federal Reserve. The effect of this factor will be the weaker dollar. At the same time, it is a positive impulse for hazardous assets, which also include the zloty.

Aversion towards risk

Uncertainty concerning Greece discourages the investors toward the hazardous assets. Recent comments about the possibility of agreement before the upcoming summit of the eurogroup, on May 11th, are clearly “cooling down” the optimism. On May 12th, Greece has to settle another payment for the International Monetary Fund. However, it is not clear, whether this country has enough means to pay this part of the debt.

Statement of the Federal Reserve chairwoman, Janet Yellen, has also awakened some anxieties on the market. Yesterday, she estimated that the evaluations of shares and bonds are quite high, which can create some potential risks. After this statement, the shares on the most important stock markets were overvalued.

The Fed chairwoman has also warned that the increase of interest rates in the United States can mean a steep rise of the debt's profitability. Thus, the sale of bonds is now on. To a great degree it touches the European debt, which has recently recorded high evaluations, due to the program of assets' purchase, performed by the European Central Bank.

A strong drop of bonds' prices has forced the Polish ministry of finance, to cancel the debt's auction. This movement was justified by the lack of supporting market conditions. Profitability of 10 year old bonds got near to 3 percent, in relation to the approximate 2 percent in January.

Overvalued zloty

Yesterday, the Polish currency received fundamental support from the Monetary Policy Council. It is due to the fact that the bits about the strong zloty were cancelled from the communicate. Additionally, chairman Marek Belka assured during his press conference, that the monetary authorities are not making any assumptions concerning the rate of the zloty, which is the subject of the market mechanisms.

However, as for now the zloty did not take advantage of that impulse. It's because the recent information concerning Greece is quite disturbing. Additionally, the atmosphere on the markets was spoiled by the Federal Reserve chairwoman, Janet Yellen. Also, the elections in the United Kingdom are bringing a lot of uncertainty.

Thus, a strong aversion towards risk is visible on the markets. Its consequence is the zloty wear off. The Polish currency is losing very clearly in relation to the franc, which is visible on the drop of EUR/CHF pair.


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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