Daily analysis 25.05.2015

More problems from Greece – Athens will probably not be able to make another payment to the IMF and the creditors toughened their stance. Yellen was not as dovish as expected on Friday. The zloty is weaker after election but consequences for currency from surprised outcome should be short lived.

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

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

Greece again in the headlines

During the weekend there were many negative reports about Greece. The market was mainly focused on comments from the interior minister. Nikos Voutsis who claimed that Hellenic Republic would not be able to pay another 300 million euro installment to the IMF which is due on June 5th.

Moreover, Athens would have to find around 1.5 billion euro by June 19th for a set of payments to the IMF. If Greece fails to produce an agreement with the creditors to unblock the bailout money it would have to default on its debt.

Bankruptcy does not, however, have to mean that the Hellenic Republic leaves the eurozone, but it is hard to say whether the ECB can continue to maintain the liquidity operation when Athens are not able to further proceed with reforms.

The Financial Times also reports that creditors tightened their stance toward Greece and require complex reforms. In the last few weeks, the investors have been speculating whether the IMF may be dropped from the agreement and the burden regarding help to Greece would be held only by the Eurogroup. It has finally resulted in both Hollande and Merkel joining the Lagarde view to wait for the comprehensive reform plan and then proceed with the bailout money.

On the other hand, the increased pressure on the Tsipras cabinet may push Syriza to some agreement in exchange for minor concessions from the creditors. The Greek budget seems to be empty and the perspective of further deterioration of the economic situations can be a more luring idea than another election.

It is possible that the situation may be tense at least till next week. Until we get a comprehensive solution regarding Greece the issue should still heavily weigh on the EUR/USD for the incoming sessions.

Yellen less dovish

Friday's statement from Janet Yellen on the US economy was more bullish than expected, especially taking into account the most recent “minutes” and economic data. The Fed's chairwoman claims that the slowdown in the US was caused by transitory issues and she expects a rebound in the following quarters.

Yellen also confirmed that the first interest rates hike is still seen this year if the economy grows in line with her plan. However, for more hints investors would have to wait till the next Fed meeting, which is scheduled for mid-June. The FOMC is expected to give new economic projections and the decision will be concluded with a press conference. It would be one of the most important meetings in the recent quarters.

Foreign markets in a few sentences

Friday's higher inflation from the US, more negative news from Greece and relatively hawkish Yellen's comments have caused the EUR/USD to remain around 1.10. Today, due to the fact that most markets are closed we should not expect any significant events but tomorrow the US data would again be in the spotlight. Currently, the sentiment for the most heavily traded currency pair is grim mainly due to Greek issues.

Election impact on the zloty

The zloty weakened to most foreign currencies after the presidential exit polls were published. The depreciation, however, wasn't that large and amounted to around 0.02-0.03 PLN at the highest point. The Polish currency is also under pressure due to global issues and weaker domestic data. This theory can be confirmed by confronting the PLN with the HUF. The first is lower to the Hungarian currency by around 0.5% comparing to trading before the first round of election results two weeks ago on Friday.

In the next few days the issue of politics is expected to die down, however it is likely to return in the autumn when the parliamentary election is due to be concluded. Its impact is supposed to be more visible for the currency especially if neither of the major parties will be able to form a majority government. But until this time the PLN is expected to be dependent on the eurozone's economic situation, changes in the US monetary policy and local macroeconomic reports.

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

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