Daily analysis 27.04.2015

, author:

Marcin Lipka

The Riga summit has ended but the discussion on Greece has not. Weaker US dollar before the Federal Reserve meeting and the GDP reading. The zloty did slide significantly on Friday and despite today's strength it may take some time to return to appreciation.

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

  • No macro data which may significantly affect the analysed currency pairs

An ongoing discussion on Greece

Despite the fact that the Riga summit ended on Saturday, the Greece discussion is still quite vocal. There are reports in the media that prime minister Varoufakis received a strong opposition from other eurozone leaders. However, it didn't prevent him from remaining fairly bullish regarding making a comparison between his plan and Roosevelt's “New Deal” on Twitter.

Moreover, “The Wall Street Journal” writes that Slovakia, Slovenia and Lithuania wanted to discuss Plan B on Greece. The idea was rejected due to the fact that extensive talks on an alternative idea may prompt the market participants increase the risk aversion and Greeks to withdraw more funds from the local banking system.

Regarding more optimistic news, during the weekend Greek prime minister Tsipars talked on the phone with Merkel and the eurogroup chief. It was not clear whether the discussion brought the sides closer, but close contact between the leaders might have eased some tension which was experienced during the Riga meeting.

The recent developments should confirm that the deal is expected to be reached “last minute”. It will show to the Greek society that the current government is taking care of ordinary people's interests and is not frightened to fight for their fate with passion. In the long run, however, the strategy may result in many more disputes with its creditors.

GDP from the US and the Fed

The macroeconomic calendar is virtually empty in the first two days. It results that besides news from Greece, investors would try to evaluate the following developments from the US. On Wednesday, the first quarter GDP reading is expected to hit the wire and the Federal Reserve is scheduled to conclude its monetary policy decision with the statement.

The Bloomberg consensus predicts that the US economy is expected to grow 1.0% on the seasonally adjusted basis in Q1. However, taking into account the methodology and the fact that the reading is annualized even a small mistake in the prediction may be seen as a significant deviation from the estimate. It is also confirmed by the high range of expectations (from +0.1% to +1.5%).

On Friday, the Federal Reserve is scheduled to deliver its April statement on the monetary policy. The FOMC may either get more dovish claiming that the current job market and stronger dollar cut the growth prospects or rewrite its March statement with only minor changes. A more dovish stance should push the dollar lower and bring the EUR/USD above 1.10.

Volatile zloty

A significant depreciation of the local currency, observed during the end of Friday's session, may be a result of the events in Greece. However, it would be a simplification especially that the PLN was rising during the negotiation process and was at a much worse condition. Moreover, it had been pretty clear before the meeting even started that no major solution is expected.

Similar moves were also observed on both the Turkish and Hungarian currencies. The only difference was that the lira slumped to the lowest level in history to a basket of currencies and it happened a few hours before the moves on the forint. It may suggest that the trade was initiated due to changes on the Turkish currency.

Fundamentally, the situation on the PLN hasn't changed much, but higher volatility is possible in the following days. It should also not be excluded that the EUR/PLN may even top 4.05 before it slides again below 4.00.

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

Range EUR/USD 1.0750-1.0850 1.0650-1.0750 1.0850-1.0950
Range EUR/PLN 4.0000-4.0400 4.0000-4.0400 4.0000-4.0400
Range USD/PLN 3.7100-3.7500 3.7500-3.7900 3.6700-3.7100
Range CHF/PLN 3.8500-3.8900 3.8500-3.8900 3.8500-3.8900

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

Range GBP/USD 1.4950-1.5050 1.4850-1.4950 1.5050-1.5150
Range GBP/PLN 5.5600-5.6000 5.5200-5.5600 5.6000-5.6400

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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