Afternoon analysis 08.05.2015:
The Greece prime minister announces signing of the agreement with the international creditors. Bad data from Germany. High volatility of EUR/USD after the data from over the ocean. The zloty makes up for the losses in the second part of the session.
Couple of days before the key meeting of the eurogroup set for May 11 there still are no information regarding an understanding between Greece and its international creditors. Moreover, on May 12 Athens are to make a payment to the International Monetary Fund. At the same time there is still no information if the country has enough money to pay the liabilities.
On Friday the Greece's prime minister Alexis Tsipras assured that regardless of many difficulties the agreement will be signed shortly. The chief of the government said he hopes that the agreement satisfies both parties. This should clear the path to passing over 7 billion euro of the another installment of the help programme. Without this money Greece will have a hard time paying its liabilities.
The Reuters agencies announced today reiterating information from its sources from the International Monetary Fund, the European Central Bank and the European Comission that even though the negotiations made progress, reaching an understanding before the Monday's eurogroup meeting is not very plausible.
An important part to withhold progress of the negotiations are expectations concerning the reform of the labor market and the retirement system.
The German disappointment
The recent data regarding the German economy are quite weak. Even though the industry index - that is, the PMI - remains below 50 points, it fell. The ZEW index's movement was similar. However, the Ifo index showed a clear improvement of the situation
However, the most recent data from the industry are weak. The orders in industry rose only by 0.9 per cent in March. This is a significantly worse result than anticipated 1.5 per cent. Additionally, a month earlier the orders fell also by 0.9 per cent.
The situation with the industrial production is quite alike. In March it fell by 0.5 per cent in relation to the previous month. This result also did not meet the analysts' anticipations which expected raise by 0.4 per cent. Moreover, the February data were revised downwards. In accordance with the most recent estimations, the production in February didn't raise, and the anticipations were at the level of 0.2 per cent.
The mixed data are quite a disturbing forecast before the GDP data next week. If they do not disappoint, this factor might weigh on the euro.
A swing after the data
The data from the United States introduced a lot of commotion on the currency market. On one hand, the April report was in line with expectations - the employment in the non-agricultural sector rose by 223k, which was in line with anticipations. The unemployment rate fell as anticipated to the level of 5.4 per cent.
However, the data from the last month were revised downwards. In accordance with the recent estimation the employment in March rose only by 85k - significantly less than anticipated earlier 126k. The data on salaries were also disappointing. They rose only by 0.1 per cent, which is lower than last month and less than anticipated 0.2 per cent.
A look at the labor market from the recent reports' perspective does not answer directly the question if the recently observed repression of the economy is temporary or not. Thus, the chaotic behavior of the EUR/USD pair after the data were published. The rate of the most important currency pair were not able to take a clear direction after the data were published, and it was expected that the readings would cast more light on the American economy.
The zloty makes up for the losses
The second part of the session let the zloty to make up for a part of losses from the first part of the session. In the case of the Swiss franc, the zloty has erased almost all falls from today. This movement is a result of a significant strengthening of the EUR/CHF.
The Central Statistical Office of Poland (GUS) will publish the data on the GDP in 2015 Q1 in a week. Judging by the data published so fat - especially the report from the labor market - it might be anticipated that the report will support the conviction of the good shape of the Polish economy.
The expectations regarding the interest rates raise in the United States have been delayed until later this year. The data from the Polish economy arte satisfactory. At the same time, the eurozone supported by the bonds purchase by the European Central Bank starts to speed up. This situation creates favorable conditions to the zloty appreciation. The Polish currency might return to the strengthening along with decreasing of the aversion towards the assets from the emerging markets .
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