Daily Analysis 22.04.2015

Sentiments' fluctuations about Greece. The market is now less anxious of the events concerning this country. Is it the end of the rouble's rally? Zloty clearly loses on its value, and EUR/PLN returns above the limit of 4.00. However, the further and clearer wear off of the national currency, is unlikely in the present situation.

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

• No macro data that could significantly impact the analysed currency pairs.

Strong fluctuations of the sentiments

Due to the lack of specific macroeconomic information, the market is clearly following the incoming news from Greece, which is changing very quickly. Just yesterday, before noon, the investors were anxious about the consequences of decreasing the stream of liquidity for the Greek banks by the EBC, or Tsipras' unprecedented decision about the means' transfer from the local to the central budget.

However, the situation slightly changed in the afternoon. The information agencies began to quote the anonymous representatives of the European Union, that the discussion’s progress is visible in both technical and political matters. Also, a statement from Varoufakis appeared in the late evening. The Greek minister of finance claimed, that both sides have invested considerable effort in reaching an understanding, and neither will allow to bury this opportunity.

The above statements have not been confronted with the representatives of the EU, but the forthcoming days can reveal more information. First of all, on tomorrow's European Union summit about immigration an unofficial meeting between prime minister Tsipras and chancellor Merkel is supposed to occur. Second of all, some decisions may still be undertaken during the discussions of the ministers of finance in Riga, which are planned on April 24th.

However, irrespective of whether we will see a breakthrough this week or not, we still see the Greek matter as a political game in Greece itself, as well as in the eurozone. Thus, the bankruptcy of Greece is very unlikely at this moment, and the chances for Athens to exit the eurozone are even smaller. However, considering the commitment of all sides, the crucial decisions will probably be undertaken at the last moment. Thus, it can generate variabilities through the upcoming weeks.

Is it the end of the rouble's rally?

From the beginning of February up to the middle of April, the Russian currency has enforced itself in relation to the dollar by 30%. On the other hand, the rouble has lost 7% to the buck. The appreciation movement on the RUB was initially generated by the rebound on the oil market, and the decrease of tension in the region. However, when it appeared that the area of 55-60 roubles per dollar will mark the new level of balance, the increase of the Russian currency's value continued.

One of the reasons was the position's reverse against the rouble. Another catalyst of changes, was the 50 billion USD repo operation program, which was already initiated by the central bank in October. It was supposed to serve the Russian companies, which experienced difficulties with repayment of the debts denominated in dollars, due to the difficulties in gaining the American currency.

However, when the tension decreased, it was used for speculating, by the use of “internal carry trade”. The whole trick was to borrow dollars with a low percentage, exchange them for roubles, and the means were invested on the monetary market. Thanks to the high interest rates (14%) and the increase of the rouble's value, the profits from this operation were 20% from the beginning of this year.

A clear enforcement of the rouble, and speculations about the currency, are however not advantageous neither for the government, nor the Central Bank (CBR). Appreciation of the Russian currency, which crosses the increase of the price of oil, decreases the budget's income denominated in the RUB. Thus, the central bank has decided to increase the cost of liquidity in the dollar, and is trying to decrease the appetite for the rouble by verbal interventions.

It can not be excluded that the monetary authorities summit planned for 30th of April, will also be used to do it. The market consensus is assuming a decrease of interest rates by 100 basis points, down to 13.00%. However, it is possible that the CBR will want to stop the increase of the rouble's value, by another deeper cut, or by a communicate. Thus, we can assume that the rouble's rally has ended, and only a clear increase of Brent oil's price (above the limit of 65-70 USD) could activate it again.

Correction wear off of zloty

The past hours have been marked with clear increases on EUR/PLN. However, we can currently consider them as a work off of recent drops, and basically nothing indicates, that the appreciation of zloty in relation to euro, will be stopped. There is a small chance that euro-zloty would cross the level of 4.05, even if we consider a major disturbance related with Greece.

Optimistic data

The situation of the franc looks more disturbing. A slight wear off of the zloty in relation to the euro connected with EUR/CHF maintenance in the area of 1.0250, causes the Swiss currency to cost 3.90.

Solid readings of the national industrial production (+8.8% y/y) and retail sales (+3.0%), have also caused an upwards review of expectations concerning the economic growth. JP Morgan claims, that the national GDP will increase by 3.8% q/q in annualized presentation, which would translate to approximately 0.9-1.0% q/q and 3.2-3.3 y/y. On the other hand, Citigroup thinks, that GDP will increase by 3.2 in the first quarter of 2015 in y/y relation, and 3.7% in the whole year.

When it comes to the upcoming macro data, neither “minutes” publication from the recent MPC summit, nor the unemployment data, should have any crucial meaning for the zloty. PLN will be more dependant from tomorrow's PMI from the eurozone, and Friday's Ifo from Germany. The better the readings, the bigger chance for a fast comeback of EUR/PLN below 4.00.

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

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