Daily analysis 19.05.2015

Yesterday's news from Greece and today's appearance of Benoit Coeure cause the EUR/USD to lose 300 pips since the beginning of the week. Signals from Greece, and speculations regarding Juncker's plan. The zloty returns to the area of 4.05 due to the optimism on the debt instruments market.

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

• 14.30: Initiated investments in the real estate sector in the USA (estimations: 1.015 million).
• 14.30: Permission for construction work in the USA (estimations: 1.064 million).

Mysterious actions of the EBC

Weekend speculations regarding the future of Greece, caused a clear reduction of the European currency on Monday. Today, the EUR/USD continued to fall, but for different reasons. In the morning, yesterday's appearance of Benoit Coure about the zero interest rates policy was published.

The statement about the will to postpone part of the purchased bonds from the summer holidays to May and June, appeared to be very interesting for the market. According to Coure, it is related to the smaller liquidity of the bonds in summer. It's to prevent too big disturbances on the debt instruments. The amount of purchased assets, will however, not be changed and it will be on average 60 billion per month.

Thus, this movement should theoretically not cause any bigger changes. However, the investors started speculating about its relation to the problems in Greece. If Athens will not choose to compromise in the forthcoming weeks, the commotion on the market may appear to be so strong that the standard purchase of bonds can not be good enough. However, if the EBC will have a chance for greater interventions, the destabilisation will not be as intense.

It is difficult to say which concept is more likely. However, irrespective of the scenario, those purchases will be for some time bigger than expected. Thus, a part of the market started buying the German or Spanish debt. This on the other hand, caused a decrease in its profitability and translated on the currency market. Currently, the investors are very sensitive to the increase/decrease of disparity of future interest rates between the eurozone and other main economies.

Greece is still important

The government's negotiation strategy has clearly lost its supporters in Greece. According to February's surveys presented by Skai TV, 72 percent of respondents supported Syriza in this matter. Currently, it's only 36 percent. However, it does not ruin the overall high support for Prime Minister Tsipras' coalition itself. 36% of society would still vote for the extreme left, whilst the main opposition party can count only for 15.5% of the votes.

As if that was not enough, over half of the respondents disagree with pushing the minister of finance away from the negotiations. Does it mean that the Greeks want to break the negotiations? Not necessarily. Half of the respondents are afraid of Greece exiting the eurozone. Thus, it seems that the citizens would preferably receive aid, would not conduct reforms, and would sustain the reign of the populist government.

The representatives of the Syriza themselves are optimistic about the development of the situation. In his TV interview Varoufakis said, that the agreement with the creditors can occur within the forthcoming week. However, this information has no significance for the market.

The publications regarding Juncker's plan are also becoming less and less significant. According to “the Financial Times” which cites the Greek newspaper “Vima”, the chairman of the European Commission is to present a partial extension of the aid program for Greece. The IMF would not participate, due to its hard standpoint towards the reforms. However, the European Commission spokesperson claimed that she can not confirm this information.

Many threads of this situation and Greece's claim attitude causes bigger difficulties in establishing any kind of agreement. It increases the risk of repeating a situation which occurred yesterday.

Few words about the foreign market

Unexpected appearance of the European Central Bank thread caused further sale of the euro. However, it will probably only be a temporary element. In the forthcoming days the market will return to the events on the other side of the ocean. Especially if tomorrow's “minutes” will appear to be relatively dovish, which will be confirmed e.g. by the comments of Janet Yellen on Friday. Thus, for now the dollar should remain relatively weak, and only the return of the good data from the other side of the ocean can cause a systematic settlement of the EUR/USD, which we have observed since June 2014 until March this year.

A strong influence of the global market

Yesterday the zloty lost over 0.02 PLN in relation to the euro. It was after receiving the negative information from Greece. Today on the other hand, the EUR/PLN pair returned to the area of 4.05 due to the purchase of debt instruments caused by the comments from the EBC. There is a big probability that throughout the forthcoming days the national currency will move in the rhythm of the global market of bonds and the appetite for risk.

Tomorrow's macro data will most likely have an insignificant implication on the PLN. If the publications of the retail sales (estimations: +1.0% y/y) and the industrial production (estimations: +5.5% y/y) from Poland, does not differ much from the economists' expectations, their impact on the zloty will be very limited.

Thus the base scenario for the zloty, should still be moving in the area of 4.05 per euro, and slightly over 3.90 per franc. On the other hand, the clearer movements on the bonds' market and the Greek thread can cause the range of fluctuations to be relatively wide (plus/minus 0.03 PLN).

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

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