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Daily analysis 08.06.2015

8 Jun 2015 13:14|Marcin Lipka

The rumour disturbed the morning quotations on the EUR/USD. There is still no breakthrough in releasing help for Greece. Difficulties in creating the government cause a clear overvalue of the Turkish currency. The zloty remains under pressure of the geopolitical situation, and recent poor macro reports.

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

  • No macro data that could significantly influence the analysed currency pairs.

Data. Rumours. Greece

Good data from the American labour market caused a clear enforcement of the American currency, and made the EUR/USD to go to the area of 1.1100 at the end of last week. On Friday, we received William Dudley's comments that he was already embracing better readings from the other side of the ocean.

Chairman of the New York Fed confirmed the will for initiating the cycle of tightening the monetary policy already this year. That is of course, if the data from the labour market will continue to be good and the perspective of inflation will go towards the two percent target. However, Dudley is not certain whether the economic increase will be big enough to continue improving the labour market's condition. He also claimed that the tempo of interest rates' increase will be gradual. Thus, it was a relatively neutral appearance considering the wide optimism caused by the good data.

Today the market's attention was captured by an interesting rumour. According to the information agencies one of the French officials, participating in the G7 meeting, said that President Obama considered the strong dollar as a problem. Right after this information appeared on the market, the EUR/USD increased by approximately 60 pips. After approximately an hour, the White House made a statement that Obama had not said anything of said nature. However, the market did not return to the previous levels.

Of course, it is difficult to estimate what the truth is. However, the supposed view of Obama can be quickly related to the opinions of the Federal Reserve's main members, who can, for example, express such views in their conversations with the president. On the other hand, it can truly be just a rumour. However, it directs the market's attention to references to the dollar in future Fed announcements.

The matter of Greece is still one of the main topics on the market, despite the fact that the investors are beginning to tire of it. There has been a clear cooling of relations between Athens and its creditors. The chairman of the European Commission, who has been relatively favourable towards Tsipras, is recently more and more sceptical regarding the whole situation. On Saturday, he refused to talk to the Greek prime minister on the phone.

Of course it is still difficult to say how much of this information is a trial of powers between both sides, or an attempt to “soften” the more radical part of Syriza. It is supposed to make them resign from their unrealistic promises, which were made during the elections campaign. However, the base scenario for Greece is the agreement. But in order to achieve it and summarize the whole aid program by 30th June, the standpoints of both sides need to come closer within the next few days. It seems that this deadline should not be crossed.

The lira is clearly under pressure

Since the morning the Turkish currency has lost approximately 5% in relation to the majority of currencies, and the USD/TRY pair has reached historical records. It is a consequence of the surprising result of the elections. The investors expected the reigning AKP party to get enough votes for independent governing, but not enough to change the constitution and increase the prerogatives of President Erdogana.

However, it appeared that the AKP will not be able to create the government by itself. The opposing parties gained more support than expected and also the pro-Kurdish party entered parliament. This will probably cause Turkey to be ruled by a minority government, and another election to be announced within the next 45 days.

The best, although less possible scenario, would be creating a coalition with one of the opposing parties. This would allow a government to be created, as well as slightly “clearing” the political situation, and, for example, decreasing the impact of the current administration on the central bank's actions.

Apart from the political matters, the lira has also been negatively influenced by the economic situation, especially a high (approximately 6% of the GDP) deficit on the current account, which has been maintained for many years. When combined with a high inflation, relatively mild monetary policy and a perspective of raising the interest rates in the USA, it will result in a mixture which causes strong pressure on the local currency. Especially, when looking at its nominal values (excluding inflation). Thus, the chances for further wear off of the TRY are significantly higher, than the possibility of generating an enforcement trend.

Few words about the foreign market

The lack of any significant macro data this week causes the market to concentrate on the information from Greece, and the comments of the Federal Reserve representatives. However, one can not exclude that the forthcoming days can be relatively calm. It’s because the bigger players will be getting ready for the next FOMC summit, which is likely to end next Wednesday.

Difficulties in working off the losses

The zloty is experiencing clear difficulties in working off the recent losses. Apart from the matters regarding Greece and the weaker macro data some disturbing news appeared from Ukraine, and today's sale on the Turkish market, caused by a political stalemate. As a result, the EUR/PLN remains in the limits of 4.15-4.16, and in the short-term it is difficult to find an argument for enforcement of the Polish currency.

However, chances for a return of the stronger zloty in the long perspective are still significant. The balance of the Polish economy's current account, solid increase of the GDP, and possible monetary tightening in the second half of 2016 should have a positive impact on the zloty. Nevertheless, of course, it needs to be kept in mind that there might be some commotions caused by the parliamentary elections in the autumn. Especially in the perspective of establishing a stable government.

The forthcoming days will probably go to the rhythm of global signals (Greece, signals from the Fed), and information from Turkey. Establishing a coalition in Ankara can enforce the zloty by approximately 0.01-0.02 PLN, but another election will maintain the pressure on the currencies of the emerging markets.

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

Range EUR/USD 1.1150-1.1250 1.1050-1.1150 1.1250-1.1350
Range EUR/PLN 4.1200-4.1600 4.1200-4.1600 4.1200-4.1600
Range USD/PLN 3.7000-3.7400 3.7400-3.7800 3.6600-3.7000
Range CHF/PLN 3.9600-4.0000 3.9600-4.0000 3.9600-4.0000

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 5.6600-5.7000 5.6800-5.7200 5.6400-5.6800

8 Jun 2015 13:14|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 05.06.2015

5 Jun 2015 12:59

Daily analysis 05.06.2015

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Afternoon analysis 03.06.2015

3 Jun 2015 13:22

Daily analysis 03.06.2015

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