Daily analysis 10.04.2015

A clear enforcement of the American dollar on the global market. Bigger chances for a deal with Greece next week. Zloty returns to the area of 4.00 per euro, but another wave of drops on EUR/PLN before MPC summit, is unlikely.

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

• No macro data, that could have a significant impact on analysed currency pairs

Catalyst of USD enforcement

EUR/USD has dropped by almost 200 pips since yesterday afternoon. However, the most interesting thing is, what caused such a strong reduction in price. Of course, one can concentrate on the weekly applications for the unemployed, but they were close to expectations, and could only slightly help the American currency.

It is worth looking at a more fundamental factor, which is the expectations for tightening the monetary policy on the other side of the ocean. An approximation of this process should be shown by the higher profitability of treasury bonds. They have increased quite noticeably right after the session in the United States started (by almost 10 base points), although, it is difficult to say, which of the markets actually started this movement. It's because the changes in the currency, as well as on the debt instruments, have perfectly overlapped.

Going deeper into the possible reasons, it is also worth looking at oil. Usually a stronger dollar is a signal for a decrease in energetic resources. This time however, the behaviour of WTI could be a good catalyst of the USD enforcement. After a serious reduction in price on Wednesday, caused by the increase of supplies in the USA, the oil tried to generate a correction. However, working off has clearly lost on its strength, and in the early afternoon, the oil began to go down. It was more or less two hours before the increase of the American treasury bonds, and the dollar's enforcement.

When we are talking about such a nervous market, and close to the levels by which the fates of correction were in weight, even such a relatively “distant” reason, could cause a movement on treasury bonds as well as the USD.

Deal with Greece is closer

This can seem odd, but many things show, that the Greeks are willing compromise regarding their feud with the creditors. At least that is how we can receive the interview with Yanis Varoufakis on Bloomberg television. The Greek minister of finance said, that Athens needs “deep reforms, and his country is not at all asking for a reduction in debt”. Referring to the prime minister Tsipras' recent visit to Moscow, he said that the head of the government was not there to look for solutions to the Greek debt. In his opinion, those matters should be solved together with “the European family”.

We have heard some relatively positive statements about the upcoming “solution”, from Italy and France's ministers of finances. Padoan claimed, that “the situation is developing in a good direction”, and Valls noticed, that “there is progress”, and Greece leaving the eurozone is not an option.

Christine Lagarde also spoke relatively optimistically about Athens. The IMF chairwoman claimed that her meeting with the Greek minister of finance was “constructive”, and the Fund is “ready to acknowledge some pre-election promises of the government”.

All of the above statements can mean, that “the labour groups” have established the majority of crucial points, and the politicians are trying now to “sell” this message to their societies. It can also not be excluded, that we will find out more details concerning the understanding, even before April 24th.

Few words about the foreign market

A clear exit of EUR/USD below the level of 1.0750, already gave a “technical” signal, to sell the main currency pair. With quite a disturbed market, and the confirmation of this movement by other assets strongly related with the dollar (oil, treasury bonds), the decrease accelerated very quickly. What is interesting, the market hasn't even noticed the positive signals from Greece, which were one of the arguments weighing on the euro. We will have to wait for optimistic reactions, probably until the beginning of next week.

A chance for further enforcement

The zloty returns to the limits of around the level of 4.00. Despite, maintaining the positive sentiment on the Polish and Hungarian currencies, we should not expect a clear exit below this limit. Despite the neutral statements of minister Szczurek concerning the PLN appreciation in relation to the EUR, the market will be careful with quick provocation of the NBP reaction.

Thus, the base scenario should still be at a price near 4.00 PLN. If however, the MPC and chairman Belka would minimize the drops of EUR/PLN during the press conference, we could expect a clearer decrease of the basic currency pair, on the national currency market. Additionally, if it will combine with the speculations about the understanding between Greece and its creditors, we can expect euro-zloty to go down even to the areas of 3.95, at the end of next week.

Due to the depreciation of EUR/USD, USD/PLN pair returned to the growths. However, it is worth noticing, that instead of testing the area of 3.90, the dollar is beginning to approach the area of 3.80. We owe this to the drops in EUR/PLN. The situation looks similar with the franc. EUR/CHF went down below 1.04, and does not generate a visible increase of the Swiss currency, in relation to the zloty. Similar dependences should also maintain in the upcoming days.

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

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