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Afternoon analysis 27.01.2015

27 Jan 2015 17:25|Artur Wiszniewski

Moody's said Greek elections outcome negative for county rating. Slippage of the UK economy didn't affect the pound. US reports also below expectations, what hit the dollar. The zloty weakened due risk aversion increase.

After Syriza's win general election Greece mounted as a major risk factor for financial markets. This was reflected in today's market developments as Moody's Investors Service said that the left wing party win poses a threat to financial sector stability. S&P also assessed the situation in the same way.

Fulfilling of Syriza's promises will add to risk that the country will deteriorate its financial stability and undermine the GPD growth. In a negative scenario the country would decide to not paying its debt, what would cut off Athens from financial markets. Although the odds for a similar scenario are rather low, there is some anxiety due to it.

Frank volatility

Heightened volatility in the frank market is another risk factor. This is an exemplification of the influence of the Swiss National Bank decision to drop floor in the EUR/CHF.

The EUR/CHF is volatile due to information that the SNB interventions last week were highest in years. Moreover, the SNB official said that the monetary authorities will not tolerate to extensive appreciation of frank. In addition, presumably hedge funds close positions in frank market as the SNB threats to employ more interventions.

The swing of CHF/PLN is a fallout of this situation. The frank dropped today as low as 4.06 zloty, but later it gained near 4.17 zloty.

Some poor reports

Today's data from the United States and the United Kingdom revealed some deterioration in the economic landscape. This added to volatility as the US and UK economy have been considered as major growth engines among developed countries. Although given today's reading one can't lower the overall look at these economies, market participants are susceptible for negative informations.

The GDP growth in the UK in fourth quarter of 2014 stood at 0.5 percent from the previous quarter and 2.7 percent on a yearly basis. This was below market expectations. Moreover, the US reports on durable goods orders also missed projections – it dropped 3.4 percent against expected growth.

What was interesting, the pound was strengthened against the dollar. And the US currency fell against all major pairs.

Weaker zloty

Portion of weak data from major economies, the anxiety concerning Greece and speculative moves in the frank market all added to risk aversion in the markets. In addition, the weather condition in the US are very bad, and it may hurt the GDP growth – similarly as in the previous year.

Increased uncertainty resulted in significant drop in the stock markets – the drop exceeded 1.5 percent in the European and the US markets. Correction came after the European Central Bank decided to launch quantitative easing, what led stock markets at record highs and left the euro at its eleven years lows. However, today there is also some profit taking, what resulted in the second winning session for the euro in a row.

The zloty was weakened against major pairs despite the dollar. Today's reports from the Polish economy didn't affect the domestic currency (more in our morning commentary). Heightened volatility is a negative factor for the zloty, what will likely result in a weaker Polish currency.

27 Jan 2015 17:25|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:

27 Jan 2015 13:04

Daily analysis 27.01.2015

26 Jan 2015 17:48

Afternoon analysis 26.01.2015

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Daily analysis 26.01.2015

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Afternoon analysis 23.01.2015

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