Daily analysis 10.07.2015

, author:

Marcin Lipka

After Greece sent its offer of savings, the agreement with the creditors became closer. Have the Greeks “copied and pasted” the reform demanded by the Eurogroup at the end of June? The zloty clearly gains thanks to the improvement of the global sentiment.

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

  • The creditors' opinions regarding Greece, especially those coming from Germany and the Baltic States.
  • 18.30: Appearance of Janet Yellen in Cleveland. It is not clear whether the Fed chairwoman will refer to the current matter related to the monetary policy.

The agreement is up for grabs

The situation regarding Greece is changing very quickly. Out of the extreme pessimism at the beginning of last week, it reached an explosion of optimism on Friday. It is related to the fact that Greece sent an offer of reform to the creditors. What's interesting is the fact that it is practically the same offer as the one presented by Troika at the end of June.

Peter Spiegel, the chief of the Financial Times office in Brussels, shared an opinion on his Twitter account that the recent offers from Troika are very similar to what the Greeks sent yesterday evening. When we compare both documents and an offer from the Eurogroup included on the European Commission website on 28 June, it becomes clear that the documents are practically identical when regarding factual and graphical matters.

Thus, the optimistic reaction of the eurozone representatives should not be surprising. After all, they were the ones who prepared these offers. The market interpreted this information in the same way. The euro clearly gained to the dollar, the stock markets increased, and the spread between profitability of the German and the Spanish and Italian bonds decreased very clearly.

Is everything clear?

At first sight it seems that Tsipras compromised with the creditors. However, it is not entirely true. After all, the reform concerned the aid program which ended at the end of June. At that time, there were no discussions regarding a third financing offer for Greece that would amount to more than 50 billion euros. It is difficult to imagine that this detail will go unnoticed by, for example, the German parliament, which must agree on the new aid pack.

The next matter is the fact that Tsipras struggled for the reduction of debt. Currently, there is no chance that the Germans will agree on its nominal decrease. However, the market thinks in a completely different way. Most of all, it tries to evaluate whether an agreement will be achieved. Whether the aid will be worth a few dozen or several dozen billion euros, will only remain the subject of moral reflections.

Few words about the foreign market

A very clear acceleration of the matter regarding aid for Greece improves the market sentiment. It is possible that the Troika will present a coherent opinion regarding the program, and will allow some of the eurozone countries to vote even today. It is also likely that after the weekend the matter of Grexit will return only as theoretical reflections.

An increase in the EUR/USD in the recent hours can carry on until the end of the day. However, the participants of the currency markets may quickly realise that the Greek situation's improvement is actually increasing the chances for raising interest rates in the USA, and using the euro for carry trade. Thus, when an increase in profitability of the German bonds will stop, the sellers of the main currency pair may quickly return to the game, and the EUR/USD can again go to the area of 1.10.

The zloty clearly gains to the main currencies

A very clear improvement of global sentiment has enforced the national currency. Not only has the zloty gained to the dollar or pound, but also to the euro. There were lesser changes on the franc, and the CHF/PLN did not manage to go below 4.00 PLN.

Currently, there is only 0.02-0.03 PLN of the Greek bonus included in the EUR/PLN rate. Thus, if the official agreement is not achieved, there is no way that the euro-zloty will go below 4.15 and the franc will cost less than 3.95.

If the situation regarding Greece will be settled, next week investors will concentrate on Janet Yellen's appearance in front of the American Congress. It is possible that in her statement or during the questions and answers session she will give hints to whether she is closer to the supporters of raising interest rates in September or in December. This will determine the condition of the dollar to the zloty, but also a general attitude towards the currencies of the emerging markets.

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 4.1600-4.2000 4.1600-4.2000 4.1600-4.2000
Range USD/PLN 3.7500-3.7900 3.7800-3.8200 3.7100-3.8500
Range CHF/PLN 3.9800-4.0200 3.9800-4.0200 3.9800-4.0200

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

Range GBP/USD 1.5450-1.5550 1.5350-1.5450 1.5550-1.5650
Range GBP/PLN 5.8000-5.8400 5.7600-5.8000 5.8400-5.8800

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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