Daily analysis 15.07.2015

All EU countries will have to participate in the first part of financial assistance to Greece. Tsipras interview for public TV does not indicate significant issues regarding parliamentary voting. Yellen's testimony and US production in focus today. The EUR/PLN falls below the 4.15 mark.

Macro data (CET- Central European Time). Survey is supplied by Bloomberg unless otherwise noted.

• 14.00 CET: Inflation from Poland (survey: minus 0.8% y/y and +0.1% m/m)
• 15.15 CET: Industrial production from the US for June (survey: +0.2% m/m)
• 16.00 CET: Janet Yellen hearing before the House of Representatives. Q&A session from congressmembers.
• In the afternoon voting on new acts in Greece parliament

Legal issues

Just after 11.00 CET the European Commission published a document regarding the short-term Greek financing. It turns out that the Hellenic Republic needs 7 billion euro in July. Additionally, in line with the Commission view, this part of the aid will be provided by the whole European Union, rather than only by eurozone countries.

The bridge financing is expected to be taken from the EFSM program. According to the data seen on the ECB website, the EFSM allows to provide up to 60 billion euro financing to one of the EU countries which experiences “exceptional circumstances beyond their control”. It is an open question whether Greece really can be described by this definition. The issues can also create some tension within the EU.

Yesterday when only rumours appeared that the EFSM can be used to help Greece, a strong opposition was heard from the UK, Denmark or Sweden. During the weekend everybody thought that only the eurozone countries are expected to provide financial assistance for Athens, not the whole EU. However, could it be possible that this issue will block Monday's agreement?

It seems to be improbable. According to the EU law only 65% of votes is enough to use the EFSM according to “The Wall Street Journal” reports. It means that even if all non-euro countries rejected the idea it would still be possible to give Athens bridge financing.

Besides inside issues of the European creditors, some turmoil has been created by leaks from the newest IMF report. According to media rumours the Greek debt may be unsustainable and would need to significantly extend its maturity combined with lower interests or some nominal relief. Additionally, the Fund cannot make additional loans to a country which can experience unsustainable debt. But according to the recent news the IMF will be on board in the third Greek bailout.

Some turmoil in the creditors camp brings less attention than today's voting in the Greek parliament. It is possible, however, that it would be rather calm. The coalition is expected to win the voting and the first part of reforms would be agreed upon despite Tsipras calling the deal with creditors “bad” yesterday.

The prime minister and the agreement seem to be supported by the public. According to polls run by Kapa Research 70% of Greeks want the parliament to accept the plan proposed by the creditors. It also gives a mandate to coalition to vote “yes”.

The foreign market in a few sentences

Today, besides news from Greece, the market is expected to focus on messages from the US. After weak retail sales reported yesterday investors are seen to observe industrial production. In the afternoon Janet Yellen is scheduled to speak before the US Congress. The Q&A session may be especially interesting.

If Yellen's answers set the market for a December hike (international issues, negative impact from a strong dollar) then the US currency may significantly weaken. On the other hand, if the Fed's chairwoman points out that the slowdown in the H1 was only temporary and the US economy is on track to recovery, the EUR/USD may fall below this week’s lows.

Fed and Greece expected to impact on zloty

The EUR/PLN pair fell slightly below the 4.15 level. It is a signal that the zloty may be partly pricing in the positive message from today's vote in Athens. As a result, if Greece accepts the creditors acts then the EUR/PLN should not fall below the level of 4.12.

The zloty's condition will be dependent on the US reports. Weak data from the US and relatively dovish comments from Yellen might strengthen the local currency both to the dollar and the euro. On the other hand, if the industrial production turns out to be better than estimated and the Fed's chief is more bullish on the US economy the zloty may weaken 2-3 zloty-cents to the dollar and 1-2 to the euro.

The least amount of attention will be put on the Polish CPI reading. The publication will have to be significantly deviate from estimates to bring any moves.

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

Range EUR/USD	1.1050-1.1150	1.0950-1.1050	1.1150-1.1250
Range EUR/PLN	4.1200-4.1600	4.1200-4.1600	4.1200-4.1600
Range USD/PLN	3.7000-3.7400	3.7300-3.7700	3.6600-3.7000
Range CHF/PLN	3.9400-3.9800	3.9400-3.9800	3.9400-3.9800

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

Range GBP/USD	1.5450-1.5550	1.5350-1.5450	1.5550-1.5650
Range GBP/PLN	5.8000-5.8400	5.7600-5.8000	5.8400-5.8800

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