Daily analysis 22.06.2015

, author:

Marcin Lipka

The agreement between Greece and its creditors is coming closer, but some nervous moments can still be expected. A record reduction of short positions on the euro before the meeting of the Fed. Chairman of the Federal Reserve from San Francisco expects two hikes in interest rates this year. The zloty gains approximately 0.02 PLN in relation to the main currencies, but the euro and franc are still relatively high.

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

  • 16.00: House sales in the American secondary market (estimations: 5.28 million, annualized reading; increase by 4.8 m/m)
  • Tomorrow at 9.00: The initial PMI from France (industry: 49.6 points; services: 52.6 points)
  • Tomorrow at 9.30: The initial PMI from Germany (industry: 51.2 points; services: 53 points)
  • Tomorrow at 10.00: The initial PMI from the eurozone (industry: 52.5; services: 53.6 points)

Greece and its creditors are closer to achieving an agreement

Today, at approximately noon, a meeting of the ministers of finance from the eurozone will be held. It will regard the plan of reform in Greece. Also, a summit of the eurozone countries leaders is planned for today at 19.00 CET. However, during the weekend and this morning it seemed that both sides' standpoints are slowly coming closer.

On Sunday, the Greeks presented a scheme of a few reforms. Athens will introduce three scales of VAT and raise the fiscal burdens for the wealthier citizens and enterprises. The reform will also regard the pension system, especially the possibility of quicker retirement.

The creditors evaluate those projects rather positively, but their comments are cautious. Pierre Moscovici, the European Commissioner for business, claimed that the offer “is going in the right direction”. Martin Selmyar, chief of Juncker's advisers, considers it to be a “good base” for further discussions.

The base case scenario is to achieve a certain agreement tonight, or at least to establish a credible plan which will allow the payment of another tranche of aid for Greece in the forthcoming days. If the discussions do not end with such a conclusion, the situation of the Greek bank system can become really dramatic.In only one week, over 5 billion euro were withdrawn from the banks and before noon the EBC had to increase liquidity for the third time since Wednesday. An artificial extension of the discussions in such a situation, which would be extremely unreasonable.

The CFTC data and comments from John Williams

The CFTC data from Friday evening show that the amount of speculative positions against the European currency made a record increase over one week. On 9 June there were almost 140 thousand net of them, and on 16 June it was barely 90 thousand. It is the least since July 2014. It is also worth stressing that at the end of March 230 thousand positions worth approximately 30 billion euro assumed a further decrease in the common currency.

It sometimes happens that changes in futures contracts overtake the events on the cash market. This phenomena was observed in the summer of 2014, when the number of speculators backing a decrease in the euro was quickly increasing and the EUR/USD rate was relatively stable. Will the situation be similar now? Much depends on the macroeconomic data from the USA and eurozone.

The chart presents the EUR/USD rate and the CFTC data


  • Source Bloomberg, own calculations:
  • The net number of speculative positions on the EUR/USD (white line, left scale, “minus” means that the market participants assume the decrease in the euro's value to the dollar). The EUR/USD rate (yellow line, left scale)

Apart from the CFTC publication, the comment from John Williams was also interesting. The chairman of the Federal Reserve from San Francisco has a right to vote this year, and his views were considered as being similar to Janet Yellen's. He claimed that he “expects two hikes in interest rates this year”. Additionally, Williams thinks that the economy is close to reaching full employment.

John Williams was a bit more sceptical about the inflation, but considering his views, his statement should be received as hawkish in general. It also makes one wonder, who in the group of 7 members is expecting just one hike in interest rates this year, if Williams is not among them?

Few words about the foreign market

In the short-term, the agreement between Greece and its creditors should be advantageous for the euro. However, the EUR/USD will quickly begin to concentrate on the economic perspectives of Europe and the USA. They will determine how the quotations of the main currency pair will look in the forthcoming months. On the other hand, if there is no breakthrough today (very unlikely) the euro could lose very clearly on value. Especially to the dollar or franc.

Limited improvement of sentiments

The zloty's week began with an enforcement by approximately 0.02 PLN to the main currencies. If the agreement between Greece and its creditors is achieved, one can expect the EUR/PLN to go to the area of 4.13-4.14, and the CHF/PLN will probably drop to below 3.95. One would have to wait for the better national data and a clear improvement of sentiment in the eurozone, in order to see further enforcement of the zloty. This however, will probably happen no sooner than in the holidays.

On the other hand, in case of a lack of progress in the discussions between Athens and its creditors, one can expect a clear deterioration of the sentiment in Europe, and a visible decrease in the zloty's value. The EUR/PLN could quickly cross 4.20 PLN, the franc would probably reach 4.05 PLN, and the dollar could be even more expensive than 3.75. If the control of capital flow would be adopted in Greece, it would mean a further wear off of the PLN to the foreign currencies by even 0.05 PLN – most of all to the dollar and franc.

After having a detailed look at the matter of Greece and the events from the last few hours, it is definitely more likely that a certain understanding will be established tonight. Thus, it appears that the zloty should be stronger than at the start of the day.

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 4.1500-4.1900 4.1500-4.1900 4.1500-4.1900
Range USD/PLN 3.6900-3.7300 3.7300-3.7700 3.6500-3.6900
Range CHF/PLN 3.9700-4.0100 3.9700-4.0100 3.9700-4.0100

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

Range GBP/USD 1.5850-1.5950 1.5750-1.5850 1.5950-1.6050
Range GBP/PLN 5.8200-5.8600 5.7800-5.8200 5.8600-5.9000

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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