Daily analysis 05.01.2015

Night drops of EUR/USD down to barely 9-year low, after news from Der Spiegel. Are there any chances for a positive solution to a Greek tragedy? Forint close to the historical low against euro after weak PMI. Dollar achieves the highest value since culmination of the crisis, and EUR/PLN finds itself in the areas of 4.30.

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

• No major macroeconomic events that may affect analyzed pairs.

9 year low

The weekend news of 'Der Spiegel' caused a quite clear reduction of common currency's price, just after the initiation of Asian trade. In reference to its sources, the German magazine wrote that chancellor Merkel is ready to accept the Greek exit from the euro zone. Additionally, according to Hamburg's weekly, Berlin claims, that it might be inevitable, if Syriza will win the elections planned for January 25th.

Of course one might wonder, if it is not a controlled leak, which aim is to encourage the moderate Greeks to give their votes on parties, that continue current policy. According to surveys, almost 2/3 citizens of Greece wants to maintain the euro. Thus, if the majority wants to keep the common currency, they should support those groups, that will ensure it.

However, the market has not interpreted it in such way at first. Using low liquidity before the Monday's opening of stock markets in Asia, it took EUR/USD down to 1.1864, which is 13 pips below minimums from the mid 2010. That way the main currency pair reached the lowest levels since February 2006. And though that during the European session we have observed a clear bounce, the levels in limits of 1.15 will begin to attract the rate more and more. It is not excluded, that they will be reached in the upcoming weeks.

Chart of EUR/USD within last 15 years

Source: Bloomberg. Drops of EUR/USD means a weaker euro in relation to USD; monthly interval.

Chances for a positive solution

Apart from the negative scenario of situation's development in Greece – Syriza's rise to power and managing the country in a way, that will make exiting the euro zone necessary – it is also worth taking a look at the possibility of a positive ending of the Athen's drama.

According to Bloomberg, it may be heralded by former prime minister's, George Papandreou, announcement about founding a new party on 3rd of January. “Democratic Socialists” are at the moment not considered in any surveys, however in previous studies of public opinion, 6.1% of respondents declared a will to support the hypothetical party created by Papandreou. If the above expectations would fulfil, “Democratic Socialists” along with “New Democracy”, could gain predominance in the parliament, even if current ally – PASOK – would achieve a weak result.

This fact would of course allow controlling the situation in the euro zone and take further the dangers related with Greece. However, in order for this to happen, we still have to wait for at least few surveys, in which Papandreou's party will appear as a third force in the parliament.

Forint goes lower and lower

Weak reading of Hungarian PMI (50.7 vs 55 points in November) and the tense in Euro Zone, caused a clear wear off of forint. EUR/HUF crossed the level of 320, and it was only by 1% for euro to reach the highest rate in relation to Hungarian currency in history.

Rate of EUR/HUF in recent 15 years

Source: Bloomberg. Increase of EUR/HUF means a weaker forint in against the euro.

It is hard to say does the weaker PMI means worse days for the Hungarian economy. During recent years the December's data were very often clearly below the annual average. This indicates, that the readings may be incorrectly seasonally adjusted. However, it does not change the fact that the interest in Budapest in region may decrease, and Hungary might end up as “the weakest link”. If this happens, the weakness of HUF will deepen.

Few words about the foreign market

Speculations about news from 'Der Spiegel', will probably remain the main topic until the end of this day. However, if during the upcoming hours we will not come back above 1.2000 on EUR/USD, this trick may appear even more difficult later. Especially that the estimations concerning Wednesday's data about inflation from the euro zone, indicate a negative reading for the first time for over 5 years. This of course, is an invitation for EBC, to activate the quantitative easing already on January's summit, and a further pressure on common currency.

Dollar most expensive from 6 years

Low evaluation of EUR/USD and forint's weakness caused the EUR/PLN to go up to the areas of 4.32. Later, when the tension on European market slightly decreased and the investors noticed optimistic statements of the economists' chief in Ministry of Finance, euro-zloty returned in the limits of 4.30.

In his interview for 'Rzeczpospolita' Ludwik Kotecki said, that the increase in 2014 amounted over 3.3% and the government maintains the prognosis in limits of 3.4 for the upcoming 12 months, although the “risk balance” has deteriorated since the September's prognosis.

Due to the decrease of main currency pair down to 9-years old minimums, USD/PLN reached today barely 6-years old maximums. Although we still do not assume a long term weakening of the zloty in the base case scenario, even if the situation in Greece will be complicated, the short term clearer reductions of national currency's prices are possible, and it is not excluded, that during the upcoming weeks “the buck” will test 3.75-3.80.

Rate of USD/PLN in recent 15 years

Source: Bloomber. Increase of USD/PLN means a stronger euro and weaker zloty.

The upcoming hours on domestic currency should be calmer. There is a small chance for EUR/PLN would cross 4.32, and CHF/PLN would again test 3.60. Also the American currency will not get too far from the areas of 3.60.

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

Expected GBP/PLN levels according to the GBP/PLN rate: