Daily analysis 28.05.2015

, author:

Marcin Lipka

Yesterday's controversial comments from Greek officials on expected agreement might have been inspired by Tsipras. Williams does not exclude interest rate hike in June. The zloty remains under pressure from external issues and comments regarding presidential election. The Swiss franc is still expensive.

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

  • 14.30 CET: US weekly jobless claims (survey: 270k)

Tsipras’ bluff

On Wednesday afternoon Greek officials leaked a message to the media that a draft of the agreement had been prepared. Some details were even presented – primary budget surplus and pension overhaul. The closeness of the deal was also confirmed by Tsipras who was supposed to be in close contact with the creditors in order to push for the final stage.

The information brought a significant reaction to the market. The euro rebounded and the stock markets surged. However, the troika officials quickly denied any incoming deal. The European Commission deputy who is responsible for the Greek case claimed that the negotiation hasn't yet finished. The IMF officials denied any comments.

The following hours were full of creditors comments which mainly expressed surprise that such comments were given by the Greek side, while no progress had recently been made. Why was such a message funneled to the market? The answer might be in the hands of the Ekathimierni paper quoted by Bloomberg.

It claims that Tsipras’ advisers suggested leaking some information to the market to calm the situation down and reduce the deposit outflow from the Greek banks. If the press is right it may take some time for the market to believe in any news coming from the Hellenic Republic.

Regarding the market reaction, many participants closed some positions against the euro due to the fact that the Greek message could have an element of truth. It is possible that progress has been made, however, the presentation of the data is, at the least, non-standard.

Comments from the Federal Reserve

The most recent comments from the Federal Reserve were quite muted. There were not many hints regarding the future monetary policy from Yellen's speech and Stanley Fischer’s presentations. The San Francisco Fed chief was also resilient to make any groundbreaking claims.

John Williams confirmed the widely known stance that the Fed is waiting for more data to evaluate how much of the weak data can be contributed to the weather in the first quarter and what may be a cause of the overall slower growth. Williams, also announced, in line with most of the Fed participants, that the FOMC can raise interest rates at any meeting, including the one in June. However, the real odds for such a move are really low.

We should expect that the market is going to scrutinize the incoming economic data especially those connected with the job market, inflation and future industrial performance.

Foreign markets in a few sentences

Issues regarding Greece are still dominating the EUR/USD rate. Investors should also focus on data from the US. They are key to future FOMC decisions and therefore to the dollar valuation.

The zloty still remains weak.

The Polish currency didn't get excited with the leaked news from Greece. It remained fairly low and stable. The same situation was observed on the debt market where yields are still pretty high comparing to its counterparts. This might be proof that foreign capital is still reluctant to open new positions on local assets.

News agencies are still filled with comments from financial institutions regarding the further consequences of the most recent election. The British investment fund Schroders claims that Poland lost some of its shine after Andrzej Duda’s victory and it will loosen its fiscal policy regardless of the outcome of the parliamentary election.

The Bank of America stressed that if Law and Justice wins the election it may push for 8 MPC members who are set to be loyal to the new government. The BofA suggests that most central bankers might be dovish but also points out that it can be hard to find so many officials who support the loose monetary policy.

It is worth admitting that the amount of publications regarding the Polish market is quite impressive. Most of them, however, are negative. Additionally, there is still the pending Greek issue. But when the dust settles, the zloty might regain most of the losses especially that valuations are getting more attractive taking into account the good prospects for the Polish economy.

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

Range EUR/USD 1.0850-1.0950 1.0750-1.0850 1.0950-1.1050
Range EUR/PLN 4.1000-4.1400 4.1000-4.1400 4.1000-4.1400
Range USD/PLN 3.7800-3.8200 3.8200-3.8600 3.7400-3.7800
Range CHF/PLN 3.9800-4.0200 3.9800-4.0200 3.9800-4.0200

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

Range GBP/USD 1.5350-1.5450 1.5250-1.5350 1.5450-1.5550
Range GBP/PLN 5.8200-5.8600 5.8000-5.8400 5.8400-5.8800

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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