Afternoon analysis 06.07.2015:
The markets recovered again after another Greek shock. The euro and the zloty are working out the losses that were incurred during the first hours of Monday’s session. Greece is replacing the minister of finance to a more conciliatory choice.
The investors reaction to the negative information from Greece was similar to the previous week. There was a nervous atmosphere during the Asian session. The euro fell below 1.10 dollars. The zloty also lost in value. The range of the Swiss franc was over 4.06 zloty but then it fell to 4.02 zloty.
As time past the situation stabilised slowly. This means that the scenario from the previous week was copied when Greece surprised the markets with the decision of breaking the negotiations with the creditors and holding a referendum.
End of Varoufakis era
Today, Yanis Varoufakis has resigned from the role of the minster of finance (more about this issue in the morning commentary). In the afternoon, the Prime Minister of Greece, Alexis Tsipras chose his successor. The new head of the ministry of finance will be Euclid Tsakalotos. The politician who so far has been the deputy finance minister for some time had an important role as the leader of the negotiating team.
What is really important, Euclid Tsakalotos is considered to be much more prone to compromise than his predecessor. The head of the Greek government therefore hopes that, after five months of fruitless negotiations conducted by the previous minister, a politician with a less confrontational attitude will be able to achieve better results.
Yanis Varoufakis had his personal conflicts with the German minister of finance Wolfgang Schäuble and the Eurogroup leader, Jeroen Dijsselbloem. The messages concerning the meetings of the finance ministers of eurozone were dominated by information about exchanging verbal abuse by the Greek finance minister and key European politicians that were mentioned before. There were no announcements about the progress in the negotiations.
Banks closed to Thursday
The first decision of the new finance minister will be the extension of the capital control. The banks are going to be closed to Thursday. It is possible to expect that the term of the banks opening will be changed. For an economy which is in recession, that means the further costs of the trade restrictions and closure of companies.
The Chancellor of Germany, Angela Merkel met with the President of France Francois Hollande. For now there was no information published after the meeting. The overwhelming victory of the opponents of the Greek savings policy may mean that some European politicians will strongly criticize the German attitude towards the fight with the crisis. This could mean the weakening of the position of the head of the Berlin government. Each split in the creditors' camp will increase uncertainty in the markets.
There is a meeting scheduled on Tuesday between the Eurogroup. It will concern the Greek issues. The new finance minister of Syriza's government is going to take part. The atmosphere in which the talks will take place will be very important because it will be compared to the time of Yanis Varoufakis. Athens needs quick decisions which will allow to run the banking system. If that does not happen quite quickly, the scenario of the monetary union breakdown will slowly become realized.
No chances of a gain for Zloty
Some data was presented today which would normally be of considerable importance for the investors. The morning data, about the new orders in German industry, were below expectations but the afternoon ISM report for the American service sector was better than last month. This should support the dollar.
However, in the second part of Monday’s session the zloty was able to make up the previous losses and returned to the levels of Friday afternoon, the chance to greater profits is very limited. The euro will stay close to 4.20 zloty and the Swiss franc will be over 4 zloty. During the process of solving the Greek crisis the zloty will be under pressure of risk aversion. The indicator will limit the appreciation need.
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