Daily analysis 26.05.2015

New problems regarding Greece cause further overvaluing of the European currency. Upcoming macro data can be interpreted in only one way. The zloty is clearly weaker, mainly due to global tension. The franc crosses the limit of 4.00 PLN for the first time since February 12th.

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

• 14.30: Orders for durable goods from the USA (estimations for April: minus 0.5%; excluding the means of transport: +0.3%).
• 16.00: Sale of new houses in the USA (estimations: 505 thousand).
• 16.00: Consumers' sentiments from the USA (estimations: 95 points, the final reading).

The debt market is showing sentiments

Yesterday's relatively calm reactions to the currency market on the negative information from Greece, were mainly caused by the fact that a lot of European floors were closed. Today on the other hand, the EUR/USD goes below 1.09, due to the recent negative comments regarding Greece.

The behaviour of debt instruments also indicates a clear aversion towards risk. At the beginning of the session, the profitability of 10-year-old Italian bonds, increased from the level of 1.85, up to 1.97%. What is worth remembering, is that the EBC is still present on the market. Throughout the forthcoming weeks it can purchase more bonds than over the past months, due to moving a part of the operation from the summer to May and June.

Even if the EBC stabilizes the quotations, the German debt instruments may indicate a transfer of capital to the safe harbours. Profitability of the 10-year-old treasury bonds of our western neighbour have dropped today by 5 basis points. This is a significant move, considering their level of 0.55%. The descent of profitability of Switzerland's debt below the level of 0.00%, is also good evidence of the return to aversion towards risk.

New information from Greece is still negative. The Wall Street Journal informs, that the committee of Syriza debated on whether the government should stop paying the debt they have at the IMF. 75 out of 170 members voted for this option. “WSJ” estimates that 30 parliamentarians are also against settling the foreign debt.

It is yet another element of danger for Greece. A probability of its bankruptcy has increased very clearly in recent weeks. Although going bankrupt does not mean, that the country will automatically leave the eurozone. However, the control of the capital's flow and lack of people's access to the bank savings, would clearly deteriorate Greece's economic and social situation, which is already difficult. It would also translate to a sentiment in the whole European Union.

Asymmetrical behaviour of the market after the data?

Due to the tense situation regarding Greece, the macro data can be interpreted asymmetrically today. The dollar can continue the appreciation if the orders for durable goods and news from the American real estates market, will be better than expectations. This will cause some clearer descents on the EUR/USD.

On the other hand, if the macroeconomic readings from the other side of the ocean would appear worse than the market consensus, we don't have to see a decrease in the buck's value, or an increase on the main currency pair. Currently, the Greek effect can be definitely be stronger than the single economic information.

Few words about the foreign market

Everyday the situation regarding Greece is getting more and more complicated. It increases the probability of disadvantageous development of events, which is the country's bankruptcy. Thus, the forthcoming days will be crucial for Athens, as well as for the euro. If both sides will not establish a clear way to agree, Greece can go bankrupt in June, and the common currency will clearly lose value.

Aversion towards risk is also seen on the zloty

The zloty clearly loses value again. Despite this, at first sight it can be an effect of the elections, the matter of a new president is less important than the global situation, and the problems regarding Greece. It is constantly indicated by the behaviour of the forint in relation to the zloty. In midterm, both currencies are moving in similar directions, and one time commotions are usually quickly corrected. This is also happening now. During a month the forint has enforced in relation to the zloty by only half a percent.

• Source: Bloomberg own calculations (update: May 26th).
• The chart presents the PLN/EUR (white line) and HUF/EUR (yellow line) pairs. The descent means a wear off of PLN or HUF in relation to the euro. The chart was normalized to the value of 100 for the beginning of the month, in order to completely abolish the surprising result of the presidential elections. It shows that at that time the zloty wore off in relation to the forint by approximately 0.5%. This not only includes the elections' effect, but also weaker macro data from the country (May 20th).

The market of debt instruments is experiencing a big anxiety. However, the scenario is written by the global changes back there. When the situation on the European bonds will calm down, the movements on the level of 20 base points during one session will also not be observed on the Polish bonds.

The negative sentiment on the market also causes the appreciation of the franc to the euro. Additionally, we observe the increase of the euro's value to the zloty. Unfortunately, both movements cumulate on the CHF/PLN pair. This causes its increase to the highest levels since February 12th and crosses the level of 4.00. The franc staying above 4 PLN is a base scenario, until we will not observe a clear breakthrough in negotiations between Greece and its creditors.

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

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