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Afternoon analysis 10.06.2015

10 Jun 2015 17:24|Artur Wiszniewski

The anxiety regarding Greece and the expectations that the Fed will rise interest rates were responsible for the volatility in the EUR/USD market. The zloty exploited the improvement in the market sentiment.

After a six days losing streak in the European stock markets today there was some relief. The rebound is rather a brief correction than a change of the trend in the market. There were no new information on the Greek stand-off and the reports from the economy were quite meager.

Greece without answer

The Greek Prime Minister Alexis Tsipras is expected to hold talks with the German Chancellor Angela Merkel and the French President Francois Hollande. The talks will touch the issue of the standoff between Athens and country's international creditors. Still, it is not very likely, the meeting will yield any significant outcome.

Recently, the European lawmakers were criticizing the Greek government in harsh words. Even the European Commission President Jean-Claude Juncker, who was viewed as favorable towards Athens, criticized the Greek Prime Minister Alexis Tsipras. In the meantime, Greece is waiting for an answer regarding country's latest reform plan, which was presented on Tuesday. Unofficial news say the European politicians have dismissed the proposal as insufficient for the eurozone governments to accept.

The situation leaves a broad scope for the speculations and the most negative scenario is saying that the Greece will go bankrupt. Especially in the situation when Greece has to repay the 1.6 billion euro bill to the International Monetary Fund by the end of June. The deadline is also a term when the current bailout program expires. And there is not much time left for a deal.

Confirmation that the expected meeting will take a place improved the sentiment and helped the euro. Nevertheless, the common currency is very volatile today.

Weak reports

Today's data from the eurozone were rather weak. Industrial production numbers from France and Italy missed expectations. Moreover, the reading from the United Kingdom also was worse than the forecast.

During the last days the European bond market faced a heavy sell-off. The improvement in the economic situation is faster than it was anticipated. As a result, the inflation rate rebound may be quicker that it has been previously expected, what will result in rising interest rates. This move was limited today, as the weak data show that the improvement in price growth may be slower.

Still, the reshuffling in the bond market is very dynamic. Moreover, the expectations that the interest rates will rise in the United States affect the bond market. The Fed will decide on interest rates in the next week, what will help to better asses the situation. Currently, the market consensus is the Fed will rise interest rates in September.

Stronger zloty

The improvement in the broad market sentiment resulted in a stronger appetite for risk assets. As a result, the zloty posted gains against all its major pairs.

The labor ministry revealed the forecast for unemployment rate. It dropped to the 11.8 level in May. Last time the reading was below 11 percent in September 2009.

The lack of significant information concerning Greece suggests that the zloty's move may be rather brief. A stronger rebound of the Polish currency will be possible if the Greek crisis is resolved and the Fed presents dovish stance in the next week.

10 Jun 2015 17:24|Artur Wiszniewski

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 acknowledgement of the source is prohibited.

See also:

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9 Jun 2015 17:29

Afternoon analysis 09.06.2015

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Daily analysis 09.06.2015

8 Jun 2015 17:35

Afternoon analysis 08.06.2015

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