Afternoon analysis 24.06.2015

, author:

Piotr Lonczak

Information noise concerning Greece hit the euro. The US GDP numbers in line with the forecast. The zloty moved lower as risk aversion increased.

After quite a good beginning of the week, the market sentiment deteriorated again. Yesterday's comments regarding the future Greek deal were enthusiastic. The European lawmakers were saying that a deal can be reached very soon.

However, today the market sentiment cooled down. The first part of the session was influenced by information noise concerning the Greek deal. This factor put pressure on the markets. Although the euro was stable, the stock markets dropped significantly as the risk aversion increased. The red colour prevailed in the Greek market and the country's debt market.

Later today, the German government informed that an imminent deal is not possible as the Greek Prime Minister Alexis Tsipras refused the proposal. Berlin's comments highlighted the fact, that the initiative is in the Greek side. It was also mentioned that Greece's creditors made significant concessions to the European most indebted country.

Today, the Greek proposal was dismissed by the country's creditors. Later, the international institutions submitted a new plan, which was refused by the Greek government. As a result, the Eurogroup meeting is likely to not yield an expected breakthrough.

Greece is due to make a 1.6 billion euro payment to the International Monetary Fund on 30 June. If the payment is missed, the nation will be declared bankrupt.

Moreover, the term coincides with the end of the current bailout program. If the program is not extended, the European Central Bank is likely to shut the emergency liquidity assistance for the Greek banks. As a result, the Greek financial system will collapse.

Weak reports

The final first quarter GDP reading in the United States was in line with the forecast. The GDP growth stood at minus 0.2 percent - a better result than the minus 0.7 percent reported previously. The improvement was caused by better consumption results. The major factor that hit the economy was severe winter.

Moreover, the reports concerning the German economy were also rather poor. The Ifo index, the major sentiment gauge in the country, dropped to 107.4 from 108.5 in the previous month. The result was weaker than the projection. It turns out that the unpredictability of the situation scared the German companies.

The EUR/USD was hovering above the previous close today. But the scale of an increase was getting smaller.

The zloty pressured

Lowering the chance for an imminent deal harmed the risk appetite. A drop in the stock market was coupled with the negative sentiment towards emerging currencies. The zloty dropped next to the forint and the Czech koruna.

Until the Greek crisis is over, the probability of a stronger zloty increase is limited. And even when the deal is done, the expectations that the interest rates will rise in the United States would affect the zloty. The latest comments from the Fed suggested two rate hikes this year, which will result in a limited demand for risk assets.

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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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