Afternoon analysis 19.06.2015

The situation in Greece is becoming more disturbing. The European Union called an emergency summit on Monday. The euro was calm, but the zloty dropped as risk aversion rose.

An empty economic calendar shifted the market focus to the Greek crisis. As expected, Thursday's Eurogroup meeting did not yield any breakthroughs. As a result, the European Council President Donald Tusk called an emergency summit of the European Union countries on Monday.

Thus, the final decision on Greece has once again been postponed. Before the Monday meeting, the Greek Prime Minister Alexis Tsipras said that he believes a deal can be made. However, the Eurogroup Chief Jeroen Dijsselbloem played down the Greek optimism. The Dutch policymaker said that even if an agreement is signed on Monday, there will be no time to implement and disburse the money before the end of the month.

Greece is due to make a 1.6 billion euro payment to the International Monetary Fund on 30 June. The term coincides with the end of the current bailout program. The International Monetary Fund chief Christine warned that this deadline is definitive for Athens. And if it is missed, the nation will be bankrupt.

According to unofficial sources, the European Central Bank agreed to raise the emergency liquidity ceiling for the Greek banks. The level was increased by 3 billion euro. The ECB decision came after the central bank raised the limit by 1 billion euro only two days ago. The information was announced by Bloomberg.

Deposit withdrawals exceeded 4 billion euro this month. Greeks pull money from the banking system amid the speculation of the country leaving the eurozone or imposing capital control. And a switch to the drachma would deteriorate the purchasing power.

Fed is not stabilizing any more

The Federal Open Market Committee's policy statement and its macroeconomic forecasts were more dovish than expected. This factor was stabilizing the markets against the Greek uncertainty. The outlook for an extension of the zero rate policy supported risk assets and the stock market, but the dollar was under pressure.

However, the impulse has been exhausted. Currently, investors are waiting for more data that would allow to better asses the economic situation. Next week, the data on household spending and PCE inflation will provide some information. Today, John Williams, the San Francisco Fed President, will be the first Fed member to give a public speech after the FOMC previous meeting.

Weak zloty

The Greek crisis created an unfavourable environment for the zloty. The Swiss franc moved above 4 zloty for a moment. The euro increased to the highest level since February. And the pound rose to the highest level since November 2014.

The outlook for the zloty is not favorable. Next to the Greek crisis, the latest poor economic reports have been hurting the zloty. The second quarter was clearly weaker than the first three months of the year. Given the situation, the zloty is in the position to extend its drop, if there is no deal on Greece.