Afternoon analysis 01.06.2015

, author:

Piotr Lonczak

The dollar increased on the strong economic indicators. The Greek uncertainty hit the euro. The zloty has returned to declines.

In the first of the week, the data from the US supported the dollar. The ISM index - a measure of companies' sentiment - increased to 52.8 from 51.5 in the previous month. A result above the 52 that was projected. The order index increased in the highest pace in five moths.

The ISM price index also was very positive - it increased to 49.5 from 40.5 in the previous week - a reading above the forecast. Other reports were also supporting the dollar. The construction spending growth stood at 2.2 percent on a monthly basis. In the previous month it increased 0.5 percent, and the forecast was 0.7 percent.

Missed scenario

Given the poor report on Chicago PMI, today's release is somewhat surprising. After the economic situation deteriorated in the Chicago region, the overall drop in the economic activity has been expected. After the data was released, the has been speculations that the deterioration in the economic landscape would pave the way for a significant rebound in the EUR/USD.

The scenario has been fulfilled after the data on income and spending was released. The report missed the expectations as the spending failed to meet the 0.2 percent forecast. In turn, the reading was flat. A proof that the consumption is still weak.

Still, the income growth stood at 0.4 percent - a reading above the forecast. In spite of strong labor market expansion, the US households are not eager to spend the money.

Greece pressured the euro

Last week comments regarding Greece has been calming. Although the final deadline was postponed, the key politicians and European officials have been trying to ease the tension.

The four month standoff in the negotiation between Greece and country's international creditors hit the European markets. Also in the US market the nervousness was prevailing.

The Greek government is expected to pay the 300 million euro International Monetary Fund bill due on Friday. Currently no one knows whether Athens will have enough funds to meet the IMF obligation. The IMF warned, it would cut off financing for the Greek government, if the country fails to pay. The unpredictability of the situation will continue to pressure markets.

Weaker zloty

The zloty was hit by the risk aversion stemming from the Greek standoff. The Polish currency was weakened due to quite good reports from the US economy. The improvement in the economic situation may push the Federal Reserve to consider interest rate hikes sooner than later.

Moreover, the Polish currency was hit by the economic data. After weak reports on retail sales ant industrial production, today the PMI report missed the forecast (more on the issue in our morning commentary). As a result, the zloty has been put in the position to extend its decrease.

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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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