Afternoon analysis 08.06.2015:
The EUR/USD rebounded after the Friday's losses on the strong US labor market data. The euro increased in spite of rising anxiety regarding the Greek stand-off. The zloty increased against all its major pairs, except the common currency.
A wide look at the latest news from Greece is worrying. The European Commission President Jean-Claude Juncker criticized the Greek Prime Minister Alexis Tsipras in some harsh words. The politician said that the Greek prime minister is lying and undermining the negotiation process. Last week the chief of Greek government was expected to send a reform plan, but he has not done this until Sunday.
The rough comments from the EC president show that the Greek government managed to irritate even politicians who has presented rather a soft stance on the reform plan. Juncker's attitude has been clearly milder than for example Germany's.
The Greek government was expected to pay the 300 million euro International Monetary Fund bill last Friday. The nation decided to use a special clause that allows packaging the June payments in a single installment due on the end of the month. As a result, Athens gained additional three weeks of time to sign a deal with the country's international creditors.
The German Chancellor Angela Merkel warned that there was not much time left for a deal to keep the country in the eurozone. The Berlin government chief said although the European countries are willing to help Greece, the nation must implement expected reforms to unlock bailout funds. The day after tomorrow Merkel will discuss the situation with Tsipras.
As Greece has shifted the final deadline, this risk factor will weight on the financial markets. The Greek nervousness will prevail until the end of the month.
In the morning the dollar was pressured by the information that the US President Barack Obama expressed a concern over the impact of a strong dollar on the economy. The information was given by the Bloomberg agency citing the unofficial sources in the French government. The information was quickly contradicted by the US government official (more on the issue in our morning commentary).
Nevertheless, the dollar remained under the pressure. As the economic calendar is almost empty on Monday, the investor's attention shifted to the expectations for interest rate hikes.
The Federal Reserve meeting is scheduled for the next week. The reports from the US economy left a wide scope for speculations. Friday's report on employment change (280k jobs added against the 225k that was expected) exceeded the forecast, thus it has increased the likelihood of interest rate hikes. However, earlier reports were vague (especially the data on consumption). In the context of the first interest rate hikes the September term is the most likely.
The stronger zloty
Monday's session was quite successful for the zloty. The Polish currency increased against all its major pairs except the euro.
Rising of risk aversion in the broad market is hurting the outlook for the zloty and is limiting its potential for appreciation. The major factor is the Greek standoff. Moreover, the unexpected outcome of the general election in Turkey is pressing the risk assets. Finally, the Ukrainian crisis is worsening. Given the situation, the zloty is in the position to stabilize with a tendency to decline.
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