Afternoon analysis 12.06.2015:
The EUR/USD was volatile and without clear direction. Wholesale prices in the US increased slightly more than forecast. The market focus shifted to the Federal Reserve meeting next week. The zloty dropped at the end of the week.
In May, wholesale prices in the US increased slightly more than forecast. The price growth stood at 0.5 percent from the prior month against the 0.4 percent that was projected. Also, on a yearly basis the growth was larger. It was caused by the biggest increase in the cost of fuel in five years.
Still, the core inflation growth, a measure that excludes volatile energy prices, was below the forecast. It stood at 0.1 from the previous month and 0.6 percent on a yearly basis. The forecast was 0.1 percent and 0.7 percent, respectively. As a result, the headline reading exceeded the forecast due to the price of gasoline and the overall price growth was not broad-based.
The market focus shifted to the Federal Open Market Committee meeting next week. Recent reports from the US are rather vague. Although, yesterday's data on retail sales were supportive for the dollar, today's report on inflation did not manage to help the US currency. Given the latest report, it is rather hard to guess the Fed's stance. The September term is still most likely for the first interest rate hike.
Next deadline for Greece
On Thursday, there was information that the sentiment against Greece had improved. It was caused by the talks between the Greek Prime Minister Alexis Tsipras, German Chancellor Angela Merkel and French President Francois Hollande. Moreover, the Greek government chief met European Commission President Jean-Claude Juncker. The comments after meetings were rather calming.
The sentiment was quickly deteriorated by the information that the International Monetary Fund had decided to break negotiations. The Washington-based institution blamed Greece for the situation. However, this does not mean that there will be no final agreement, the market sentiment was negatively affected.
A spike in risk aversion resulted in a significant drop in the major markets. It also affected emerging market currencies. This factor negatively affected the euro. The EUR/USD was very volatile today and without clear direction.
Although the IMF left the negotiation table, a deal may be signed on 18 June. The Eurogroup summit is scheduled for this day. The information was given by the Greek government.
In addition, the euro was under pressure by the comments made by German Chancellor Angela Merkel who said a strong euro hurts the restructuring process in the debt-stricken countries. Moreover, the industrial production report missed the forecast. It increased 0.1 percent on a monthly basis - less than the 0.4 percent that was projected.
The last day of the week was negative for the zloty. The Polish currency dropped against all its major pairs. The Greek anxiety resulted in a drop in the euro against the Swiss franc. As a result, the CHF/PLN moved higher.
The Greek crisis created an unfavorable environment for the zloty. Moreover, the Polish currency is under pressure by the expectations regarding the Fed. If the US central bank moves closer to interest rate hikes, the zloty will be negatively affected. Given the situation, the zloty is likely to exceed losses as the Greek crisis is far from the end.
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