Afternoon analysis 20.04.2015

Very good reports from the Polish economy lifted the zloty. The euro pressured by the anxiety concerning the future of Greece.

Recent comments from the major European Union officials suggest that there will be no agreement between Greece and the country's international creditors on the Eurogroup meeting on April 24. in Riga. The Eurogroup chief Jeroen Dijsselbloem and the European Commission vice-chair Valdis Dombrovskis expressed similar opinions and the information agencies cited unofficial sources confirming that view.

The statements suggest that the term for a final agreement will be postponed to the next month. The next Eurogroup meeting is scheduled on May 11. - a day before the next major debt payment of Greece to the International Monetary Fund that amounts to 780 million euro.

Although the key members of the Greek government state that they are willing to broker a final deal that includes some concessions regarding the reform plan, less important politicians are not going to be as compromise. In the recent days the reform plan that is expected by the Troika has been rebuffed by the deputy prime minister Yannis Dragasakis and the energy minister and social security minister.

An empty calendar shifted the investor's attention to the political developments. As a result, the euro dropped against the dollar – the major currency pair dropped from the highest level since 8. April that has been hit due to very disappointing data from the US economy.

Moreover, the euro was pressured by the ongoing quantitative easing program from the European Central Bank. Today the ECB president Mario Draghi wrote in the preface to the annual ECB report that the European QE is working as it was planned and the outlook for the GDP growth and the inflation developments is improving.

Stronger zloty

Today's data from the Polish economy showed a very strong picture. The retail sales growth stood at 6.6 percent on a yearly basis – clearly a result above expectations. In the preceding month the growth stood at minus 1.3 percent. Although the data was positively affected by the Easter, the overall assessment is very good. The solid gain in consumption will result in a better results of the GDP report in the mid May.

Moreover, the data concerning the industrial production were also very solid as it increased 8.8 percent – clearly a result above 7.2 percent that was projected. The production growth stood at 4.9 percent in the previous month. The production in construction was also very good by increasing 2.9 percent. The data coupled with the sale report will add to the GDP growth.

The zloty exploited the impact of today's figures to extend gains. In addition, the Polish currency was helped by hawkish comments from the Monetary Policy Council member Elżbieta Chojna-Duch (more in our morning commentary). The EUR/PLN dropped a way below 4 zloty to the lowest level in four years. The Polish currency increased against the dollar, pound and frank. The zloty managed to gain in spite of the Greek turmoil – thus if the broad market sentiment improves, the Polish currency will extend its gains against all its major pairs.