Daily analysis 11.05.2015

The euro loses its value due to the pressure of the Greek uncertainty. Athens is counting on a compromise in face of their payment for the International Monetary Fund, and the EU politicians are worried about this country's bankruptcy. The zloty wears off because of aversion towards risk.

Greece expects that during today's summit of the eurogroup there will appear an official proclamation about a significant progress in negotiations concerning the aid program. Such information was given by the Bloomberg agency, which was based on the sources in the Greek government.

Athens still believes, that it will manage to convince the international creditors to pay 7 million euro for another tranche of aid. It is possible that if the information about the progress will spread, Greece will be given a part of this money.

The Syriza government does not intend to quit their pre-election promises. Prime minister Alexis Tsipras will not agree to pro-market reforms of the labour market, changes in the pension system, or privatizing the national companies. Such attitude is criticised by the experts of Troika, which are the representatives of the European Central Bank, the European Commission and the International Monetary Fund. They estimate that without adopting the reforms, fixing the public finances and the economy will be hampered.

It is currently unclear, how long Greece can be solvent without the money coming from the aid program. A few weeks ago, the Greek government ordered the local-governments and national companies to give money to the central bank. Thanks to this, Athens was supposed to gain reserves, allowing normal activity until June.

However, some representatives of the Greek authorities estimated that even though the country intends to respect their obligations towards the international creditors, it will be a difficult task without some extra money.

On Tuesday the 12th May, Greece has to pay another installment of/to?? the International Monetary Fund. Its value is 750 million euros. Thus, it is significantly higher than the installment amounting to the quarter of a billion euro, which Athens had to pay last week. The information agencies say that some of the EU politicians doubt that Greece will pay the IMF.

The pressure on Greece was increased by the European Central Bank. Today, one of their representatives, Ewald Nowotny, reminded that the EBC is not a last resort creditor for governments. He referred to the rumour that the Greek banks used the emergency system to finance the government. Thus, the speculations about the possibility of limiting the boundaries of liquidity for the Greek creditors.

The euro is starting the week with a reduction in price. The common currency is continuing the decrease, which began on Thursday. It is descending from the highest level since half of February.

The weak zloty

The first round of presidential elections brought a surprising final. The surveys were giving Andrzej Duda (the candidate of the opposing party, PiS) smaller chances for success, than the reigning President Bronisław Komorowski. Meanwhile, it was the first of these politicians that gained a better result during Sunday’s voting.

Such a turn of events significantly decreases the likeliness for a victory for the reigning president in the next round of elections. In the case of emerging markets (which include Poland) the perspective of changing the authorities is often related with aversion towards the given country's assets. The reason is a possible increase of political risk. However, the president's influence on the economic policy is so limited that this factor does not have a significant meaning.

However, the zloty is not in good shape during this week's first session. The Polish currency is still burdened by the weakness of the euro, which is related to the uncertainty concerning the future of Greece. What is more, the recent reports from the American labour market did not explain the questions concerning the condition of the American economy. In this context, the evaluation of the Federal Reserve’s plans concerning the tightening of the monetary policy is hampered.

Nervousness is also seen on the bonds' market (especially in the emerging markets), after the comments of the Fed chairwoman Janet Yellen. She sees the high price of assets, as a potential danger for balance.

Aversion towards hazardous assets is not disadvantageous for the zloty. Currently, however, we are dealing more with a decrease correction than reversing the appreciation tendency. Thus, limiting the aversion towards risk should allow a stronger appreciation for the zloty.