Daily analysis 08.07.2015

Greece is closer and closer to Grexit after not presenting any specific propositions in Brussels. The eurozone approaches the pain threshold in the matter of Athens. The evening's publication of “minutes” wears off the dollar. The zloty is under the pressure of the external events. A press conference with Marek Belka after the MPC meeting.

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

• Throughout the whole day the reports on Greece
• 16.00: Press conference after the MPC summit
• 20.00: Record of June's meeting of the Federal Reserve
• 20.00: Appearance of John Williams, chairman of the San Francisco Fed

No breakthrough again

Yesterday's meeting of the ministers of finance and the leaders of the eurozone countries did not bring a breakthrough. Such a scenario was expected. However, not only did the sides' standpoints not come closer, but Grexit became more likely.

This was suggested by Jean-Claude Juncker among others. Chairman of the European Commission claimed that “the EC is ready for anything, we have a plan for Grexit”. The words of Angela Merkel also sounded pessimistic. She suggested that she is less and less optimistic when it comes to the matter of Athens.

The new Greek minister of finance did not make a good impression. Euclid Tsakalotos did not bring any specific plans to Brussels. It clearly irritated the participants of the Eurogroup, as well as the leaders of the eurozone. It was established in further discussions between chancellor Merkel, Prime Minister Tsipras and the chairman of the EC that Greece has to send today an official aid request to the European Stability Mechanism (ESM).

The idea of using the ESM has already appeared in the discussions regarding Greece. The problem however was that Athens wanted to reduce their debt and make the savings system milder. Applying for help from the ESM denies this strategy. The use of emergency funds demands very serious fiscal adjustments. They will probably be more significant than if Greece would walk the previously set path.

It is unknown how Prime Minister Tsipras will explain this change to the Greek citizens. Thus, it is possible that his game is coming to an end, and his constant change of views can even lead to changes in the government, despite it achieving strong social support in the referendum.

It is also worth noticing that the European leaders are reaching the pain threshold. It is mainly expressed by the countries that went through the policy of saving, even though they are not as wealthy as Greece. It increases tension inside the EU and decreases the likelihood of reaching a consensus.

Minutes from the Fed

The euro is not under pressure of a strong wear off, despite the increased tension regarding Greece. It is probably not because of the underestimation of the events in Greece, but due to two factors. First of all, by increasing aversion towards risk the positions of carry trade financed in the euro are being reversed. It causes the necessity of re-purchasing the European currency, which on the other hand withholds its decrease.

The second matter is the situation related to the Federal Reserve. A recording from the recent meeting of the Fed will be published today. Apart from the matters strictly related to the American economy, which are the discussion regarding the economic increase, level of inflation or unemployment, the market will carefully analyze any references to the global situation.

If some members of the Fed come to conclusions that the Greek matter can influence the global economy, and by that stop the FOMC from increasing interest rates, the dollar may stop enforcing. However, if it appears that Greece will leave the eurozone, these two elements will not stop the drops on the EUR/USD.

Few words about the currency market

The unresolved matter of Greece still has a relatively limited impact on the EUR/USD. Additionally, today the Fed will publish a recording of a discussion from June's meeting, which was relatively dovish. Thus, the dollar can slightly lose value until the evening. However, if within the next two days it appears that the Greek plan of applying for aid to the ESM does not contain a proper reform, the EUR/USD can be under clear pressure before the meetings of the Eurogroup and the European Union planned for this weekend.

Constantly Greece

Our region's currencies, including the zloty, are currently the best indicator of how the investors receive the events in Greece. An increase in aversion towards risk which is visible on the debt instruments market, quickly translates to a zloty wear off, not only to the euro, but also to the pound and franc. The above situation will not change, until there is no clear breakthrough regarding Greece.

The attention of the market's participants will be caught today for a moment by the MPC meeting. Early in the afternoon it was clear that the interest rates will not change. However, the press conference of Marek Belka will be interesting. It will bring some information about the basic economic indexes from the latest Inflation Report by the NBP. An increase in the GDP, as well as inflation will probably be slightly reviewed upwards, which is optimistic information.

Additionally, there will be a chance to listen to the MPC members' opinions about the Greek crisis. It is possible that there will be questions regarding the upcoming elections. If Adam Glapiński (who is considered by the media as the new chairman of the Council) is present at the conference, the answers to the questions regarding the opposition's economic plans can be very important for the investors. In the perspective of the next few hours, the euro as well as the franc will probably be on high levels crossing respectively 4.22 and 4.05.

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

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