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Daily analysis 27.05.2015

27 May 2015 13:09|Marcin Lipka

The US is getting more involved in negotiations regarding Greek bailout. Bullish macro data is dollar positive. A rebound from the latest zloty weakness. Speculations on Polish central bank chief resignation.

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

  • No macroeconomic news that may affect the analysed currency pairs

The US is becoming more engaged in Greece. Promises from Varoufakis

On Friday, the Greek prime minister spoke with the US Treasury Secretary. The Treasury didn't give many details on the conversation but one might think that it was another pursuit from the Greek side to lengthen the process or an attempt to put some additional pressure on the creditors.

This hypothesis changed a bit after some comments from the Treasury Secretary appeared before his flight to Dresden on the G7 summit. Jack Lew was pushing for a “constructive and pragmatic” solution regarding Greece, due to the fact that unpredictable consequences might appear for the society and global economy when the Hellenic Republic defaults.

As a result it is possible that Athens will dominate the G7 meeting. It is also probable that the US may get involved as a referee between Tsipras, Merkel and Lagarde. On one hand, it is proof that the situation is tense, but on the other it might bring us to a solution much faster.

Some relief to the market was also given by Varoufakis. The finance minister is convinced that Greece will be able to pay the upcoming installment for the IMF. However, there is one issue involved. Athens has to get the bailout money. Does it mean that the controversial politician is expecting a deal? This question can only be answered by him.

Today, there is also a working group meeting in Brussels. Officials from Greece and the creditors are set to negotiate on the deal. There are, however, no expectations that the discussion will bring any result.

A bit better in the US

Durable goods orders from the US were a bright spot in the data. The core reading which excludes more volatile items like aeroplanes rose by 0.5%, whereas the expectations were around 0.4%. Moreover, there was an upward revision of March from minus 0.2% m/m to +0.6%. It gives some hope that manufacturing is rebounding.

The housing data were also bullish. New home sales were higher than expected in April. It was also combined with a slight upward revision from the last month. The prices also positively surprised.

Better readings increase the odds that the US economy might rebound in the second quarter. Consequently, it can reduce calls for a longer zero interest rate policy. Furthermore, it is a bullish message for the US currency.

Foreign markets in a few sentences

More visible engagement of the US regarding Greece and an attempt to include the topic into the G7 summit might be a positive message. It does not automatically set the path for ground breaking news but can be a step in the right direction. Currently, however, it does not change the positive bias toward the dollar especially that the US currency is supported by fairly good data.

The zloty is firmer but nervousness persists. Belka's resignation rumours

Some positive messages regarding Greece and the diminishing effect of the presidential elections gave some breathing space to the zloty. However, the situation on the PLN is still tense due to the unpredictable situation regarding Greece.

In the foreign media the Polish election is still visible. Goldman Sachs wrote that the zloty might be under pressure due to higher political unpredictability. The “GS” is mainly concerned about the fiscal policy and probably some widely known promises from the political campaign.

Bloomberg also cites some comments from ING. The chief economist for the Polish unit suggests that Belka might resign before his term ends due to “health problems”. It would give an opportunity for the current president to nominate the central bank chief and the current lower house of parliament might be able to accept the candidate.

The amount of speculation regarding the Polish market is still fairly high. Besides local issues, we still have to remember about Greece. However, as emotions calm down we should expect a significantly higher PLN especially to the euro and the Swiss franc.

Anticipated levels of PLN according to the EUR/USD rate

Range EUR/USD 1.1050-1.1150 1.0950-1.1050 1.1150-1.1250
Range EUR/PLN 4.0800-4.1200 4.0800-4.1200 4.0800-4.1200
Range USD/PLN 3.6600-3.7100 3.7000-3.7400 3.6300-3.6700
Range CHF/PLN 3.9400-3.9800 3.9400-3.9800 3.9400-3.9800

Anticipated levels of GBP/PLN according to the GBP/USD rate.

Range GBP/USD 1.5550-1.5650 1.5450-1.5550 1.5650-1.5750
Kurs GBP/PLN 5.7800-5.8200 5.7600-5.8000 5.8000-5.8400

27 May 2015 13:09|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.

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