Daily analysis 13.05.2015

, author:

Marcin Lipka

Readings from China and the eurozone haven't changed the situation on the EUR/USD. More details about Greece's payment to the IMF. The zloty markedly benefited from calmer trading on the fixed income market.

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

  • 14.30 CET: Retail sales from the US (survey: +0.2%; excluding car and petrol +0.6%).

Data with no real impact

The session was dominated by macro publications. Before 8.00 CET the market received readings on the industrial production and retail sales from China. The data was close to market consensus so investors were not able to generate any FX volatility.

A fairly muted reaction was also observed after readings from the French economy. Paris published that the Q1 GDP rose by 0.6% q/q while economists expected a rise of only 0.3%. It may be a result that the data composition wasn't that bullish. The consumption rose at the fastest pace since Q1 of 2013. However, the investments dropped another quarter in a row. Moreover, despite the significant euro depreciation, the trade deficit widened and dragged on the GDP. Taking into account the consumption, trade deficit, and investment, the growth is flat. Only because of the inventory build up the reading looks rosy.

On the other hand, the weaker GDP from Germany (+0.3% q/q vs expectations +0.6%) at first sight looks much better taking into account the available data. The economy was growing due to consumption, investment and construction. The net export also dragged on the reading in Germany, but taking into account a persistent trade surplus we should expect that it is just a transitory factor.

Finally, the overall data from the eurozone was in line with expectations (+0.4% q/q). The reading was also in line with the PMI data. If the leading indicators are right, we should expect a similar growth in the current quarter.

More about the Greek payments

Yesterday we presented some skilful idea about how Greece could make its payment to the IMF using its IMF account. Today the “Financial Times” reported that according to the Greek central bank official “withdrawal from its SDR holdings was unusual but not unprecedented”. The European Commission deputy president didn't want the elaborate on the issue.

A more benign view was presented by an official from across the pond. The “FT” cited Ted Truman, a former US Treasury official and expert on the IMF operations at the Peterson Institute for International Economics in Washington who said that the SDR money is saved for "a rainy-day fund and it is a rainy day in Athens”. Truman added that “it is actually a very sensible thing to do rather than default”.

Overall it is worth noting that Athens is using all the available measures to buy some time. The case is similar regardless of the fact that the payment either has to go to the IMF or to its own citizens. What is even more disturbing is that the money from the Troika is on the table and only a credible reform plan has to be submitted.

Foreign markets in a few sentences

Due to the fact that market reaction is both muted from the eurozone publications and news from Greece it is probable that investors are anticipating the US readings. A good indicator for the market mood should be the afternoon retail sales data from across the pond. If the publication excluding autos and petrol exceeds 0.6% we should see a stronger dollar and a slide on the EUR/USD below 1.12. On the other hand, a weak reading (below +0.5%) should give an opportunity for a rise above 1.1250.

The zloty cuts some of the most recent losses

The Polish currency has strengthened against the major counterparts in the most recent hours. It was caused mainly by some calmer trading on the fixed income market. Currently, it is too early to judge whether the odds for EUR/PLN downside trend have increased. The situation on the broader market is still unclear and in such conditions it is hard to anticipate the EM currency appreciation.

It is also worth remembering the readings from the Polish economy. Yesterday, the Statistical Office published solid data on Polish trade for Q1 (2 billion euro surplus in 2015). It is a positive signal both for the current account publication on Friday and the GDP reading at the end of week. It may give some boost to the PLN if the global fixed income market stabilizes.

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 3.9000-3.9400 3.9000-3.9400 3.9000-3.9400

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 5.6800-5.7200 5.6400-5.6800 5.7200-5.7600

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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