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Daily analysis 17.06.2015

, author:

Marcin Lipka

Another element of Tsipras' game. The Greek Prime Minister accuses the IMF of “criminal responsibility”, and on Friday he is planning to meet with Vladimir Putin. A median of expectations regarding future interest rates will be crucial information after today's summit of the Federal Reserve. The zloty remains stable, but a bigger variability is practically guaranteed in the second half of the week.

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

  • 20.00: Announcement from the Federal Reserve summit, and macroeconomic projections of the FOMC
  • 20.30: Janet Yellen's press conference after the Federal Reserve summit

Greece accuses and plays on two fronts

Yesterday, Prime Minister Tsipras accused the IMF of “criminal responsibility” for the savings package forced on Greece for the past few years. Christine Lagarde, the Fund's chairwoman, is to answer these accusations today. Syriza's leader is also planning to fly to the economic forum in Saint Petersburg tomorrow and meet President Putin on Friday.

The actions of the Greek administration overlap with the words from Tsipras. This week he claimed that the negotiations have just begun. Even though it is clear that the Prime Minister's strategy is directed to his populist electors it is worth noticing that because of this the whole country can be in trouble. It can quickly translate to the nation's economic results, irrespective of how advantageous the agreement will be.

The understanding between Greece and its creditors is most probably still up for grabs. However, it is difficult to say when the breakthrough will occur. Will it be on the forthcoming Thursday, during the hypothetically extraordinary summit of the European Union this weekend, or rather at the end of next week on the EU summit?

One of the most important Fed summits

This afternoon the market will anticipate the results of the Federal Reserve summit. The projection regarding future interest rates for the end of 2015 will be crucial information. In March, the median of the FOMC members' expectations indicated that there will be two rises in interest rates. If this tendency is maintained the summit will be received as hawkish.

However, if it appears that the recent macroeconomic data from the USA, the strong dollar, and the uncertainty regarding the global economic situation have convinced the members to only one rise in interest rates, the market will receive this message as dovish. Thus, the dollar's value should clearly fall.

Apart from the indications from the dot plot, the market will pay attention to the review of future macroeconomic indexes and the announcement. Probably the announcement itself should be more hawkish than in April. Especially that the situation on the labour market and the real estates market has improved since then.

One should also not underestimate Janet Yellen's press conference. It should also be slightly hawkish, especially that the FOMC chairwoman will underline the fact that the economic slowdown is temporary.

Thus, in general there is a bigger chance that the dollar should be stronger at the end of the day. It will be due to the overall message from the Fed being hawkish. On the other hand, if it appears that the Fed assumes only one raise of the interest rates, and Yellen concentrates on the negative signs from the economy, the surprised market can overvalue the dollar very clearly.

Few words about the foreign market

The dollar should be a beneficiary of today's summit of the Fed. The projection of future interest rates will probably assume two raises this year, and Yellen is most likely to remain relatively optimistic towards the future condition of the American economy. The alternative scenario is that the dot plot will inform us about only one monetary tightening this year. It would cause a clear wear off of the dollar, and one cannot exclude that we could even see the EUR/USD in the area of 1.1400.

Strong changes on the horizon

The euro still costs 4.15 PLN. However, stabilisation of the zloty will probably not last long. It especially concerns the USD/PLN pair. If the base case scenario is fulfilled, and the Fed suggests two increases in interest rates this year, the level of 3.70 on the USD/PLN should be clearly crossed. Additionally, if tomorrow's negotiations with Greece do not bring both sides' standpoints closer, and the retail sales and industrial production data is below expectations, we can even pay between 3.75-3.80 per dollar by the end of the week.

The dollar's quotations will definitely be different, if the Fed will appear more dovish, data from the country will be good, and Greece will achieve an understanding with its creditors. If so, the dollar may even cost less than 3.60 PLN on Friday.

There will be less changes on the EUR/PLN and CHF/PLN than on the USD. Although, the more hawkish Fed, weak data from the country, and extending tension in Greece, can cause the EUR/PLN to reach the area of 4.20, and CHF/PLN to clearly cross 4.00 by the end of the week.

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 4.1300-4.1700 4.1300-4.1700 4.1300-4.1700
Range USD/PLN 3.6900-3.7300 3.7300-3.7700 3.6500-3.6900
Range CHF/PLN 3.9400-3.9800 3.9400-3.9800 3.9400-3.9800

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 5.7800-5.8200 5.7400-5.7800 5.8200-5.8600

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 Cinkciarz.pl Sp. z o.o is prohibited.

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