Afternoon analysis 15.06.2015

, author:

Piotr Lonczak

The euro was calm in spite of the Greek uncertainty. Some weak reports from the United States hit the dollar. The zloty was stable despite a spike in the risk aversion in the broad market.

Monday's data from the United States missed the forecast. The readings revealed some deterioration in the industrial sector. As a result, the dollar dropped against all its major pairs.

In May industrial production dropped 0.2 percent. Expectations were for a 0.2 percent rise. Moreover, the previous months data were revised down to minus 0.5 percent from the minus 0.3 percent that was initially reported. The most important factor was a drop in energy output that continued for the third month in a row.

In addition, a deterioration in the industry was shown by a poor result of the New York Empire State index. The measure dropped to minus 2 from plus 3.1 in the prior month. The forecast was plus 5.2.

The US data resulted in a weaker dollar. The US currency has dropped before the Federal Open Market Committee releases its decision on Wednesday (more on the issue in our morning commentary).

The latest data concerning the US economy gave no clear picture of the situation. On one hand, the readings regarding the industry were rather weak. On the other, the labor market situation is still very solid. Moreover, the retail sales report exceeded the forecast and suggested an improvement in overall consumption.

Given the situation, there is broad scope for speculation before the Fed meeting. As a result, the volatility in the market will be rather high.

Greek uncertainty

After the Greek Prime Minister Alexis Tsipras quit negotiations, the market focus was shifting to the Eurogroup meeting on Thursday. It is the next deadline for Athens to secure a deal. Still, it is not very likely that the nation will manage to build a consensus.

The Greek nervousness negatively affected the European stock markets. Declines were prevailing on the Monday session. The market in Athens dropped as much as 7 percent.

Greece has until the end of the month to reach a deal and find money to make a 1.6 billion euro bill due to the International Monetary Fund. Nevertheless, even if the country misses the payment, it will not automatically result in an exit from the eurozone. Still, a similar scenario would be a strong risk factor for the markets.

Calm zloty

Nervousness concerning Greece did not hit the zloty. The Polish currency resisted the risk aversion that was reflected by a severe drop in the stock indexes.

Weak reports from the US suggest, that the Fed may be less willing to increase the cost of credit. As a result, the sentiment towards risk assets would be improved.

Today's domestic reports missed the forecasts. The inflation numbers stood at minus 0.9 percent - up from minus 1.1 percent in the previous month. A result less than the minus 0.7 percent that was forecast. The release on the balance of payments also missed the projection. It stood at 1.14 billion euro against the 1.2 billion that was projected.

The zloty was not affected by the culmination of the Greek crisis. However, the situation may change when the next deadline gets closer. On the other hand, the factor that might help the Polish currency would be a dovish Fed statement. Nevertheless, the zloty will increase significantly only if the Greek crisis is finally over.

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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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