Daily analysis 18.05.2015

Weak data from the US and speculations on longer zero-rate-policy weigh on the dollar. More dark clouds over Greece. The zloty remains strong and the local currency should be resilient to the political issues.

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

• No macroeconomic news that may affect the analysed currency pairs.

Weak data weighs on the dollar

Weak industrial production from the US which dropped fifth time in the row and slump in the consumer sentiment pushes the interest rate hikes further into the future. Currently investors are waiting for some clues from Federal Reserve members comments.

Few hints were given by Charles Evans today in Stockholm. The Chicago Fed's chief is regarded as one of the most dovish participant in the Committee so his remarks on first hike in 2016 and slower than expected inflations failed to spur any market reaction.

More answers should be expected in the second part of the week. On Thursday Stanley Fischer is scheduled to speak and on Friday Janet Yellen is expected to deliver a presentation on the US economy. Especially the latter should be closely watched due to the fact that most of the economic reports failed to meet the expectations since the last Fed meeting was concluded.

Dark clouds over Greece.

During the weekend there were a lot of negative news regarding Greece. Firstly, it is worth noting the “Financial Times” article where part of Tsipras letter to the IMF chief was published. The Greek leader wanted to push the ECB to unblock the treasury bills issuance by the Hellenic government.

However, the ECB will probably not agree to relax the measure regarding debt issuance due to the fact that the new bonds would be purchased by local banks. In the repo operations Greek banks use domestic papers as a collateral for liquidity operations. That would mean that the risk of financing government would be somewhat directed to the ECB.

The “FT” also reports that the IMF may withdraw the Greek bailout program if there is no progress in the negotiations. It would result in reducing the package from 7.2 billion to 3.6 billion euro.

Some critical comments also came from the ECB member. Yves Mersch on the Luxembourg radio said that we are approaching the end game with Greece. According to the central banker Athens request the money without fulfilling their obligations.

Concerns are also visible in Germany. Sigmar Gabriel, the SDP chief, told Bild am Sonntag that the referendum might quickens the decision-making process in Greece. Earlier, however, both sides resisted asking the society about the reform plans. Syriza was afraid to lose the credibility shortly after it had been elected and the creditors questioned the result of the ballot and time consuming process.

There is no doubt the that reports regarding Greece in the recent days are negative. Probably it is still a “game of chicken” and both sides are still prone to struck a deal in a matter of weeks. But the road to the agreement might be much bumpier than it was expected earlier and this fact can significantly push lower the common currency.

Foreign markets in a few sentences

The currency market should be focused mainly on the reports from the US. However, besides the macro data, “minutes” from the last Fed's meeting, and comments from Federal Reserve members, Greece might gather more attention at some point. It would be a good signal to push the common currency lower.

More data from Poland

In coming days the zloty's trade should be much calmer than last week. The EUR/PLN will be probably hovering around 4.05 and most transactions on Swiss franc should be concluded below 3.90. We don't expect a strong impact on currency from the local economy reports, unless deviation from retail sales or production turns out to be significant.

We are also not expecting a stronger volatility caused by the presidential election. Only a significant reshuffle of the political stage before the parliamentary voting might cause stronger reaction on the zloty. However, the market needs some time to build an adequate “narration” which may be visible in a few months time.

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

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