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Daily analysis 20.02.2015

20 Feb 2015 12:28|Marcin Lipka

Situation in Greece is still not clear. The general tone of European PMI is close to consensus. The market speculates about SNB buying dollars for francs. The zloty clearly corrects previous appreciation, before today's meeting of Euro group.

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

  • 15.30 CET: The beginning of euro zone's ministers of finances meeting concerning Greece.

Greece remains on the headlines

A lot of information about Greece appeared within recent hours. Initially, they were considered by the market's participants as positive. The Greek minister of finance sent a letter to the members of the euro group, in which he suggested the extension of current help program for another 6 months. However, in further part of this statement, Athens suggested changing the current help program, which has not met with a wide acceptance in the euro zone.

First reaction of European Union's authorities for Warufakis offer, were positive. Jean-Cluade Junckera spokesperson said, that the chief of European Commission “sees the letter as a positive sign, which can be a road to a positive compromise, which is in interest of whole euro zone's financial stabilisation”. Brithish “The Telegraph” even informed, that French president called to Greek prime minister, to “congratulate him this crucial decision”.

However, hopes for a quick breakthrough decreased in the early afternoon. Spokesperson of German Ministry of Finance published a statement, in which he referred critically towards the offer presented by Greece. He claimed, that “it is going in the direction of bridge financing, without fulfilling assumptions of current help program” and it does not fulfil the criteria established on Euro Group's summit last Monday.

As a result, we stepped down on EUR/USD below the limit 1.1400. However, there is a plan for another euro group's summit concerning Greece. It will be held after 3 P.M. (CET). It is one of the last moments to establish an understanding. However, it is not certain, will any decisions be made before late evening. Thus, we will have to wait for the market results until Monday.

No bigger emotions on PMI

The PMI indexes for two greatest economies in euro zone, and general readings for the whole area of common currency, have been published this morning. In general, the collective data were close to the consensus, but the differences in particular branches were significant. According to Markit, the future of French industry appears worse, but on the other hand French services branch develops fastest from over 3 years.

Services in Germany also have a relatively good result. Their readings on 55.5 level, reach their 7-month maximums. The industry results worse, just like in France. However, the index maintained above the level of 50 points, which separates development from regress in this branch of economy.

In his comment to collective PMI from euro zone, Chris Williamson, chief of economists in Markit claims, that the economy should develop in the tempo of +0.3% q/q in the first quarter. Willimason also points out on a faster increase of employment since 2011. However, all of this occurs in service sector, what does not spoil the positive tone of PMI index general increase, to the level of 53.5 which is 7-month peaks.

SNB buys dollars by selling francs?

Yesterday Reuters informed by quoting the currency market dealers, that Swiss National Bank (SNB) is selling francs, but concentrates mainly on buying the American dollars. This would overlap the suggestions of some investment banks, and also SNB representatives themselves, that if the currency interventions will occur, they will be conducted in other currencies.

Additionally, if we look at the chart of USD/CHF pair, we will notice that franc is not actually that strong in relation to the dollar, and we are currently in the areas observed in October. Bigger concentration of SNB on the dollar, can also mean negative information for the owners of credits in francs. When the monetary authorities in Zurich will say, that the current level of Swiss currency in relation to the basket of currencies is getting close to a balance level, the interventions can wear off, and this will endanger further depreciation of CHF.

USD/CHF last year

Wykres - kurs CHF - ostatni rok

Foreign market in a few sentences

The situation of Greece will be undoubtedly the main subject for the hours to come. Yesterday's commotion might also affect today's negotiation, which starts at 3.00 pm. However, both parties are believed to be able to reach an understanding. If the base case scenario came true, it is not excluded that next week will be started in the areas of 1.15 on EUR/USD. On the other hand, if the negotiations today fail and the statements from ministries of finance after the euro group meeting are negative, it cannot be ruled out that quotations on Monday open at 1.1200-.1250.

Zloty dependant on global sentiment

The domestic currency clearly weakened before the noon. The increase of the risk aversion, measured by falls of EUR/USD caused EUR/PLN to go as high as 4.18 and CHF/PLN is currently 3.88. Just as with the foreign market, the effects of today's negotiation will be crucial.

If an understanding regarding Greece is reached, it can be expected that EUR/PLN fall to the levels of 4.15. This would make CHF/PLN to go below 3.85. On the other hand, however, assuming the scenario of prolonging the stalemate, it cannot be ruled out that the European currency opens on Monday at 4.20 and the franc opens above 3.90.

The end of today's or the beginning of the Monday's session might be characterised by high volatility. Despite the fact that it is believed that the Greece issue will be solved, it cannot be excluded that the consensus isn't reached today. Thus the hours to come on the market might be restless and the zloty might further weaken before its strengthening after solving the Greek problem.

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

Range EUR/USD 1.1250-1.1350 1.1150-1.1250 1.1350-1.1450
Range EUR/PLN 4.1600-4.2000 4.1600-4.2000 4.1600-4.2000
Range USD/PLN 3.6600-3.7000 3.6900-3.7300 3.6500-3.6900
Range CHF/PLN 3.8600-3.9000 3.8600-3.9000 3.8600-3.9000

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

Range GBP/USD 1.5350-1.5450 1.5250-1.5350 1.5450-1.5550
Range GBP/PLN 5.6500-5.6900 5.6300-5.6700 5.6700-5.7100


20 Feb 2015 12:28|Marcin Lipka

This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without acknowledgement of the source is prohibited.

See also:

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19 Feb 2015 12:33

Daily analysis 19.02.2015

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Afternoon analysis 18.02.2015

18 Feb 2015 12:26

Daily analysis 18.02.2015

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