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Daily analysis 01.06.2015

1 Jun 2015 13:15|Marcin Lipka

Weak data from the US only temporarily disturbed sentiment on the market. Greece returns to the headlines. The zloty is under pressure after weaker readings from the local economy and speculations on Hellenic Republic.

Macro data (CET- Central European Time). Survey is supplied by Bloomberg unless otherwise noted.

  • 14.30: PCE inflation from the US (survey: +0.1% m/m and +0.2% y/y; core: +0.2m/m +1.3% r/r
  • 16.00: Manufacturing ISM from the US (survey: 52 points

The US data only briefly took the initiative

Weak Chicago PMI (46.2 points vs 53 expected) gave an impression that trading in the coming days would depend on the US data. But it didn't happen. The weak leading indicator from the Midwest fail to spur on fears that future more important data can bring more trouble to the dollar and prepare the ground for a dovish FOMC statement in mid-June.

It turned out that during the weekend issues regarding Greek took the lead. It was mainly caused by Tsipras’ article in “Le Monde”. The prime minister blamed creditors for negotiation hurdles. He also accused them of failing to recognize the new government.

It might have caused Merkel, Tsipras and Hollande to set up a call for Sunday to discuss future steps regarding the Greek bailout program. No details were revealed after the discussion. Only the German side called it “constructive” but it failed to cut the blame game.

No goods news is coming from the working groups, which run negotiations on technical details with Greece. Additionally, there is a fear that, if no framework agreement is announced in the coming days the whole deal might not be finished before June 30th when the current aid program should be concluded.

Increasing risk aversion is also seen on the bond market. Yields on 10 year Spanish or Italian papers are approaching 2%. The spread between similar German bonds is widening, which is usually regarded as a risk aversion sentiment. Moreover, the ECB is still on the market with its asset purchase program which works as a stabilization factor. Without the central bank’s constant intervention the situation might have been much worse.

Foreign markets in a few sentences

The market is still nervous regarding the Greek issues. However, it does not mean that it may ignore the data from the US. If today's inflation data meets market expectations and the ISM index is pushed below the 50 mark (weak Chicago PMI gives some arguments for such a scenario) then the dollar weakness might be translated to EUR/USD appreciation

On the other hand, if the US data turns out to be strong (ISM above 53), then the pressure on the common currency can be strong enough to push the EUR/USD to around 1.0800.

Weaker data again.

The weaker data from Poland and Greece are pushing the zloty lower. Today's publication of manufacturing PMI failed to meet expectations (52.4 points vs 53.5 points). Trevor Balchin, senior Markit economist claimed that the growth is the weakest since October 2014. Additionally, the lower PMI combined with slower production for April may weigh on the GDP reading in the second quarter.

Negative comments combined with another wave of risk aversion from Greece caused the EUR/PLN to approach the 4.13 level again, and the CHF/PLN is hovering around 4.00. There is still no clear sign that trends may reverse quickly and if the situation in Athens worsens then we should expect further PLN weakness in the short term.

Anticipated levels of PLN according to the EUR/USD rate

Range EUR/USD 1.0850-1.0950 1.0750-1.0850 1.0950-1.1050
Range EUR/PLN 4.1000-4.1400 4.1000-4.1400 4.1000-4.1400
Range USD/PLN 3.7600-3.8000 3.8000-3.8400 3.7200-3.7600
Range CHF/PLN 3.9800-4.0200 3.9800-4.0200 3.9800-4.0200

Anticipated levels of GBP/PLN according to the GBP/USD rate:

Range GBP/USD 1.5250-1.5350 1.5150-1.5250 1.5350-1.5450
Range GBP/PLN 5.7400-5.7800 5.7000-5.7400 5.7800-5.8200

1 Jun 2015 13:15|Marcin Lipka

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.

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