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Daily analysis 01.07.2015

1 Jul 2015 11:44|Marcin Lipka

No breakthrough in yesterday's discussions regarding Greece. The Fed underestimates the importance of “the risk of infection”. Today, we will know the first series of data from the USA, which may outshine the events from Greece for a while. The zloty is stable to the euro and franc. Good PMI readings from the national economy.

Most important macro data (CET – Central European Time). Estimations of macro data are based on Bloomberg's information, unless marked otherwise.

  • 14.15: The ADP reading from the American economy (estimations: +218k).
  • 16.00: The ISM index from the industry (estimations: 53.2 points).
  • Throughout the whole day: Speculations regarding Greece – possibility of renewing discussions, reaction of the EBC on lack of installment payment for the IMF, surveys regarding the support of the creditors' plan.

No breakthrough

Yesterday afternoon a hope for a breakthrough in the discussions between Greece and its creditors appeared. An extraordinary summit of the Eurogroup was held on which the Greek propositions were to be considered. However, they appeared to be very distant from what the creditors are able to agree on.

Tsipras wanted Troika to agree on an approximately 30 billion euro worth program, which could assure the realisation of every upcoming settlement in the next two years. Additionally, Syriza applied for a reduction in debt. The creditors' answer was quick: there is no chance for such an agreement. Despite the fact that the Eurogroup is encouraging the continuation of discussions, it expresses concern about the new offer. In its opinion, it may be worse than the one that was on the table last week.

There are still no credible surveys regarding the possible support of Troika's offer in the referendum. Information agencies cite only the studies conducted by the “Efsyn” newspaper. According to them, 46% of respondents will vote against the reform forced by the creditors, and only 30% will support them. However, it is worth emphasising that this newspaper is closely related to the government. Just before adopting the control of capital flow it claimed that 57% is against the acceptance of Troika's program and only 30% support it. However, last week's surveys indicated that there are a few to a few dozen more supporters of the reform than opponents. Thus, there is a need for the next independent surveys, which should give a better view on this matter.

Signs from the USA

There are no signs at the moment that the Greek problems could delay the increase in interest rates in the USA. At least, that is what yesterday's statement from James Bullard suggests. Chairman of the St. Louis Fed claims that “a threat for Europe related to Greece is small because the EBC initiated the quantitative easing”. Bullard also thinks that the matters regarding Greece will not change the way that the Federal Reserve sees the monetary policy's tightening. “September is definitely at stake” - says the FOMC member.

Today we will finally see some important data from the USA. It is especially worth taking note of the ADP reading. If it is in the range of 200k to 240k, the market's reaction will be mild. However, going below this range may slightly wear off the dollar and increase the uncertainty before the data from the Labour Department on Friday. On the other hand, in the case of crossing the upper level of the range, the dollar can accelerate its appreciation. Especially, if there is no good news from Greece.

One should also remember the ISM reading. The latest data (maybe apart from the Chicago PMI) indicate that the American industry should finally rebound. Thus there is a bigger chance for today's reading to cross the analysts' expectations. If this happens, one of the most important accelerating indexes in the American economy will be above the level of 53.

Few words about the foreign market

Yesterday's discussions between Tsipras and the creditors were unsuccessful. However, the return to discussions has given hope for bringing both standpoints closer just before the referendum. If there are no signs indicating the resolution of the situation before the weekend, the tension on the markets and pressure on the euro should grow each day. It is also worth noticing today’s American data. If they are good, the dollar can visibly gain in value.

A good PMI, but Greece continues to threaten

Today's data regarding the future of the Polish economy's condition gathered by Markit, were a positive surprise. The PMI index increased from 52.4% in May, to the 54.3, while the prognoses assumed no changes. The conclusions coming from the study of the national enterprises, suggest that “the tempo of production, number of new orders, and purchase activity have accelerated in relation to May”.

Additionally, Markit's senior economist Trevor Balchin wrote in his comment regarding the publication that “the latest reading was coherent with the trend registered in the first half of the year”. He also wrote that “the conditions in the Polish industrial sector remained solid”. However, the reading did not cause the enforcement of the national currency, because the zloty is still under the influence of the information coming from Greece.

A Greece related bonus included in the price of the zloty, is approximately 0.04-0.05 PLN. Thus, if the Greek situation improves, the EUR/PLN should go below 4.15, and the CHF/PLN will return in the area of 3.95. In the case of no progress in the discussions between Athens and Brussels and a negative result of Sunday's referendum, the euro can be clearly above 4.20 and the franc above 4.10. That is if the central banks will not intervene.

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

Range EUR/USD 1.1050-1.1150 1.0950-1.1050 1.1150-1.1250
Range EUR/PLN 4.1700-4.2100 4.1700-4.2100 4.1700-4.2100
Range USD/PLN 3.7500-3.7900 3.7900-3.8300 3.7100-3.7500
Range CHF/PLN 4.0000-4.0400 4.0000-4.0400 4.0000-4.0400

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

Range GBP/USD 1.5650-1.5750 1.5550-1.5650 1.5750-1.5850
Range GBP/PLN 5.9000-5.9400 5.8600-5.9000 5.9400-5.9800

1 Jul 2015 11:44|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.

See also:

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Afternoon analysis 30.06.2015

30 Jun 2015 13:25

Daily analysis 30.06.2015

29 Jun 2015 17:27

Afternoon analysis 29.06.2015

29 Jun 2015 11:37

Daily analysis 29.06.2015

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