Daily analysis 11.06.2015

, author:

Marcin Lipka

Better negotiation atmosphere regarding Greece and a new set of rumours after the meeting in Brussels. Key data from the US before the Fed meeting. Changes inside the Polish government are PLN neutral, but some dovish comments from Glapiński might be a signal of loosening the monetary policy in the future.

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

  • 14.30 CET: Retail sales from the US (survey: +1.2% m/m; excluding gasoline and cars: +0.5% m/m)
  • 14.30 CET: US weekly unemployment claims from the US (survey: 275k)

Better sentiment but no ground breaking decision

Despite some earlier fears the meeting between Tsipras, Merkel and Hollande took place during the summit in Brussels. The talks between both sides lasted until the late evening hours, but didn't bring any concrete solutions, besides some softer comments from the two parties.

After the meeting the chancellor confirmed that Greece would be engaging in talks with the creditors in the next few days. Moreover, Tsipras suggested that he would intensify efforts to decrease the differences between the two parties. Pierre Moscovici was also fairly optimistic. The EU commissioner was positive with a view that the negotiations would speed up in the following days. Finally, Tsipras is scheduled to speak with the EU commission chief today.

A slight sentiment improvement regarding Greece should not be regarded as a significant step. The real game is scheduled to start in the latter part of June when time will press both sides towards the agreement, major differences are expected to be more vocal and no one is eager to lose face.

In the last few hours a rumour arose that Germany might accept a partial agreement. Only one of the major reforms will be agreed upon but only some of the money is going to be sent to Athens. However, Berlin denied the speculations.

The latter part of the month is going to be really tense regarding the Greek negotiations. The issue is expected to have a much greater impact on the currencies than observed in the recent weeks.

Important data before the FOMC meeting

One of the major pieces of data for this week is expected to be released today. The retail sales from the US, excluding gas and vehicles, is supposed to rise 0.5%. A better reading (0.7% and above) can be a good indicator that finally Americans are more eager to spend. On the other hand, if the publication is significantly below the consensus it should push the dollar markedly lower and give a good argument for a more dovish Fed on Wednesday.

The foreign market in a few sentences.

The currency market is expected to experience major shifts in the next few days. Besides the impulses from the fixed income instrument, Greece is supposed to be much more visible. Moreover, the Fed meeting on Wednesday should give us quite a clear answer about whether the FOMC is positioning itself to raise interest rates in September or the date is still not agreed upon. The combination of signs are going to generate higher volatility but at the end a new, more sustainable trend may be generated.

Government shifts and Glapinski comments

Yesterday there were some shifts inside the Polish government. However, the political changes are not expected to generate major moves on FX. The situation would be different if none of the major parties are able to form sustainable coalitions. But this scenario would not be played until a few weeks before the parliamentary election.

Some attention should be raised regarding the most recent Glapiński comments. The MPC member was regarded as pretty hawkish for the past few years, but in the recent Bloomberg interview he seems to be pushing a more dovish stance saying that the benchmark may remain unchanged until 2017. It seems to be a significant shift especially because at the end of April the MPC was insisting on keeping the interest rates unchanged until the beginning of 2016.

There is, of course, a question whether the change of opinion has something in common with the speculations about Glapiński’s nomination as the MPC chief. If the theory is confirmed and the new Committee will be much more dovish than expected it can be a significant drag on the zloty in the long term

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

Range EUR/USD 1.1250-1.1350 1.1150-1.1250 1.1350-1.1450
Range EUR/PLN 4.1300-4.1700 4.1300-4.1700 4.1300-4.1700
Range USD/PLN 3.6600-3.7000 3.7000-3.7400 3.6200-3.6600
Range CHF/PLN 3.9200-3.9600 3.9200-3.9600 3.9200-3.9600

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

Range GBP/USD 1.5350-1.5450 1.5250-1.5350 1.5450-1.5550
Range GBP/PLN 5.6600-5.7000 5.6800-5.7200 5.6400-5.6800

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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