Daily analysis 10.08.2015

, author:

Marcin Lipka

Greece is getting closer to an agreement with creditors. Comments from Goldman Sachs for CNBC pushed the dollar lower on Friday? The zloty remains weak at the beginning of the session but the 4.20 range should not be successfully tested.

Macro data (CET- Central European Time). Survey is supplied by Bloomberg unless otherwise noted.

  • 18.25 CET: Dennis Lockhart, Federal Reserve President from Atlanta speech.

Greece agreement on the horizion.

It looks like Greece is getting closer to the agreement with creditors. At least this is a message from leading financial news agencies. Of course, taking into the account the most recent history regarding the negotiation process we cannot rule out any solution, but the most preferable option for Tsipras is clearly the solution.

Currently there is no news when Greece is scheduled to vote on the most controversial issue – pension, jobs market and administration reforms. There is also the case with privatization. Any of this problems will not probably solved in the coming hours or days so we should assume that they will be included in the framework agreement.

Germans, who are the most sceptical creditors, would like to prolong the bridge loan for Greece and use it for bonds repurchase which are due on August 20. According to Berlin, this would make more room to negotiate a comprehensive deal. This time, however, our western neighbour is going to give up.

It is still not clear whether if the IMF is going to participate in the first part of the deal. The Fund claims that the Greek debt is not sustainable. As a result, it is possible that the Christine Lagarde will get involved in the matter at a later stage when some debt relief is agreed by other creditors.

As “Financial Times” reports, Greece would like to receive around 24 billion euro in the first tranche of the 86 billion bailout. Twelve billion is scheduled for the debt repayment, 10 for bank recapitalization and 5 for the public companies debt.

The dollar is lower

It is worth returning to Friday's Labor Department data. The reading was close to the consensus, both regarding the payrolls and unemployment rate. Also the monthly wages growth was in line with expectations.

Shortly after the NPF hit the wire, the dollar strengthened pushing the EUR/USD towards 1.0860. An hour later the market generated a rebound which was significantly lengthened after comments from Goldman Sachs chief economist for CNBC.

Jan Hatzius said that July's payrolls didn't change his view on the moment of monetary tightening in the US. The “GS” still expects that the first interest rate hike in the US is scheduled on December. Finally the EUR/USD finished the week above 1.0950.

It is hard to clearly decide whether Hatzius comments were the main reason behind the move or speculators just exploited the moment. It should be important whether the move can hold for following hours. In case of “yes” it may mean that the market is not exactly pushing itself for December but rather decides that September hike is “priced in” and investors would focus more on the pace of tightening in the following quarters.

The foreign market in a few sentences

Macro calendar is empty today. After 13.15 CET there is an interview scheduled with the deputy Fed's chief Fischer on Bloomberg. In the evening Dennis Lochkart is expected to deliver a speech. It would be important how the Fed's officials comment the most recent jobs report

Weak zloty

The zloty is under a slight pressure since the morning but the 4.20 level has not been tested yet. The situation is mainly a result from turmoil on other EM currencies including the Turkish lira. There is also a tense situation on Asian and Latin American currencies. As a result it would be hard to lift the sentiment on the PLN even in case of strong GDP for Q2 which is scheduled on Friday's afternoon.

The zloty may still remain under pressure in the following hours, but a significant move beyond 4.20 is still not the base case scenario. The Swiss franc should remain in the 3.90 range.

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

Range EUR/USD 1.0850-1.0950 1.0750-1.0850 1.0950-1.1050
Range EUR/PLN 4.1700-4.2100 4.1700-4.2100 4.1700-4.2100
Range USD/PLN 3.8200-3.8600 3.8600-3.9000 3.7800-3.8200
Range CHF/PLN 3.8700-3.9100 3.8700-3.9100 3.8700-3.9100

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

Range GBP/USD 1.5550-1.5650 1.5450-1.5550 1.5650-1.5750
Range GBP/PLN 5.9400-5.9800 5.9000-5.9400 5.9800-6.0200

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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