Daily analysis 13.02.2017

Investors anticipate Janet Yellen’s testimony in front of the American Congress tomorrow. Why is the market so calm regarding Greece? The zloty is slightly weaker after the macroeconomic estimates from the European Commission.

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

• 14.00: Polish consumer inflation index for January (estimates: positive 1.7% YoY and positive 0.3% MoM).
• 14.00: Polish payment balance for December (estimates: current account balance – negative 726 million euro; trade balance – negative 284 million euro).

Market is waiting for Yellen

Last week was dominated by the statements from the White House’s representatives, regarding potential changes in tax system. Before we will know the details of this project, Janet Yellen will make her testimony in the American Congress tomorrow.

First, Yellen will publish her testimony and later she will answer questions from the Senators of the Finance Committee. It is most likely that those investors who have been counting on announcements of specific changes in the monetary policy in March, may be disappointed. Moreover, the testimony alone may lack references to the anticipated modification of the fiscal policy.

However, it’s likely that the Q&A series will include some more specific references to changes in fiscal policy, as well as in the level of interest rates. Nevertheless, Yellen most likely will not try to cause serious changes in the market. This is especially taking into consideration that the forthcoming weeks may be used by the Fed to create new macroeconomic forecasts (which may acknowledge potential tax changes). This increased the risk of suggesting anything, for the time being. As a result, the base case scenario does not include fundamental changes on the dollar after tomorrow’s testimony.

Greece has minor impact on the market

The market is relatively calm towards Greece’s potential problems in paying their debts. This most likely is a result of the fact that there’s still much time left until summer, when the deadline for paying a debt worth more than 10 billion euro is due. Moreover, there are a few days left until the 20th of February. This is when the meeting of the euro zone’s ministers of finance is scheduled for.

Investors are skeptical towards the repeat of the situation from the summer of 2015. This is because Syriza’s popularity has clearly decreased and surveys show a larger support for parties, which are willing to compromise. However, the key reason to ignore the Greek problems is the fact that the euro zone has more serious problems for the time being (elections in Holland, France and Germany). Therefore, debtors will most likely agree to pay new installments of the aid and Greece will pledge to implement further reforms. The potential return of the danger is too distant to be evaluated for the time being.

Slight wear-off of the zloty

This morning, the zloty wore-off against the euro and the dollar. The majority of gains from Friday has been given away. Moreover, the zloty’s condition has remained weak at noon. This might have been caused by new macroeconomic forecasts from the European Committee.

The public finance sector deficit is estimated to reach the level of 2.9% of the GDP in 2017 and at the level of 3.0% of the GDP in 2018. The latter value is near the EU limit. Moreover, the estimated economic growth for 2017 and 2018 is at the level of 3.2% and 3.1%, respectively. These values are slightly lower than the ones estimated in autumn. The Committee also claims that the costs of lowering the retirement age will increase the budget deficit. As a result, the EUR/PLN is near 4.32.