Daily analysis 12.05.2015

, author:

Marcin Lipka

Greece pays the credit installment to the IMF, but recent summit of the Eurogroup did not bring any specific solutions. Statements of the Fed members are getting more and more moderate. High variability on the market of debt instruments is negatively influencing evaluation of the zloty.

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

  • No macro data that could significantly impact the analysed currency pairs.

There is progress, but there is no understanding

“I am not satisfied, but slightly more optimistic” - that is what the chairman of the Eurogroup said to journalists on Monday, after the summit about Greece. Pierre Moscovici was also speaking in a similar way. He claimed that the creditors see progress concerning the reforms of the Greek tax system, but there is still much to be done in the matter of pensions or the labour market.

Information that Athens had given 750 million euro of the next installment to the IMF, was also relatively positive. It will probably remain a secret for a long time, how deeply Varoufakis had to reach into the reserves. However, the statements of the Greek minister of finance about the risk of losing liquidity, reveal that Athens' financial situation is critical.

It is also worth noticing that another date which is crucial for Greece, has been set on 30th of June. It's then that the aid pack for Athens will end. It's worth 240 billion euro. If the creditors' conditions are not fulfilled by then, Greece will formally lose its right for aid.

Considering how many “final dates” have been set in the last few months, one could expect that this one will also be postponed. On the other hand, this matter has to be solved at some point. The end of half a year and cutting off the aid can cause Greece to give up, and another installment of aid (or its part) will be given to Athens. According to us, it is still a basis scenario.

Cautious comments by the Fed

Over the last few days, we have heard the statements of three important members of the Federal Reserve. During William Dudley’s appearance in Zurich today, we found out again that “the increase depends on the incoming macroeconomic data”. John Williams took the same standpoint on Monday. In his interview for the CNBC he said that the decision concerning interest rates “will be on the table during every summit”. Williams also referred to the recent data from the labour market. He claimed that they are a positive signal for the economy, and they also indicate that the first quarter “was more of an anomaly than a indication of the economy's future direction”.

For more specific data concerning the increase of interest rates, one should go back to Wednesday's appearance of Dennis Lockhart. He declared, in Louisiana, that the market's expectations concerning the increase, are “reasonable”. However, just as his like-minded colleagues, Lockhart claimed that “all summits, including the one in June, are still in the game”.

Thus, currently one should assume that the increase of interest rates on the other side of the ocean will occur in September. However, the summit in June will be really important. Thanks to the communicate and projections of future interest rates that will be published afterwards, it will be possible to confirm the date of the first monetary tightening and its tempo, with greater accuracy. The tempo after the first increase, will be a crucial topic for the markets for the forthcoming quarters.

Few words about the foreign market

The matters of Greece and the first money rates' increase in the USA, have slightly given place to the behaviour of debt instruments. The decrease of differences between profitabilities of the American and European debts has caused a reduction in expectations towards the difference between future interest rates. It can not be excluded that it may even lead to the increase of EUR/USD in the area of 1.15. However, in the long term the chances for the return of the main currency pair to drop are definitely greater than the maintenance of the current increases.

The zloty is under pressure of the market's debt

A 10-year profitability of treasury bonds' is “flirting” with the level of 3%, and its chaotic changes within the last few days have caused a clear decrease of interest in the Polish zloty. Although theoretically, the higher profitability (lower prices) should be an occasion to take longer positions on the debt market. However, this loosening of the global market of debt instruments is causing “the pit” on the price to still be ahead of us.

Additionally, the fact that a part of the wallet capital held its position by a significantly higher position has also caused some disturbance. Some investors can be forced to close their positions, and it can be difficult in case of decreasing liquidity. As if that was not enough, the above mentioned conditions discourage the others from investing until the situation calms down.

The result of the presidential elections' first round is also influencing the PLN negatively to a certain degree. However, it is worth highlighting the disturbance on the debts' market to have much more serious influence than the political matters. In the long term, and e.g. in case of “playing” the speculations concerning difficulties in forming the government after the parliament elections in Autumn, it can be a reason for an aggressive game of the wallet capital set for depreciation of PLN.

Due to the visible perturbations on the debts' market, the chances for a clear enforcement of PLN have decreased. It happened due to the fact that the national currency has definitely more reasons to enforce than to wear off. Especially in its relation towards the euro.

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

Range EUR/USD 1.1150-1.1250 1.1050-1.1150 1.1250-1.1350
Range EUR/PLN 4.0800-4.1200 4.0800-4.1200 4.0800-4.1200
Range USD/PLN 3.6300-3.6700 3.6600-3.7000 3.6000-3.6400
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 1.5650-1.5750 1.5550-1.5650 1.5750-1.5850
Range GBP/PLN 5.7000-5.7400 5.6600-5.7000 5.7400-5.7800

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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