Weekly economic update 20 - 26 February 2012
(Date: 2012-02-21)
Sentiment on the global market was highly volatile over the past week. Waves of growing risk aversion and of
substantial rebounds were replacing each other in reaction to upcoming news.
Investors have positively assessed
results of vote in Greece over austerity, but Moody’s downgrade of a couple of euro zone countries, rumours about
plans to divide lifeline for Greece into two parts and postponing of Eurogroup meeting until Monday contributed to a
major deterioration of moods. However, rise of risk aversion was only temporary, as the end of the week brought
news that the government of PM Papademos has presented a credible plan of austerity worth €325m. Additionally,
rumours emerged that the ECB is willing to take part in restructuration of Greek debt. This, together with a bunch of
better-than-expected data (among others from US housing market) contributed to a marked improvement of
sentiment. As regards domestic events, the most considerable impact was exerted by a lower-than-expected
preliminary CPI inflation in January, which supported the short end of domestic yield curve. The volatility of moods
over the week has caused that EURPLN moved in a horizontal trend, temporarily breaking its upward border at 4.23
The upcoming week will be rich in data releases being important hints on the condition of global economy. Investors
will probably pay much attention to flash February PMIs for manufacturing and German Ifo. In the previous weeks a
raft of better-than-expected data was released, markedly supporting market hopes that the imminent economic
slowdown will be less serious than feared. Eurogroup meeting is scheduled for Monday and it is expected to make
decision about the Greek bailout, which seems to be already priced-in by the market. However, market’s assessment
of complexity of the proposed solution will be important. If euro zone finance ministers allow future changes in the
agreement or leave some issues unsolved, then the impatience due to prolonging talks about second bailout for
Greece may strengthen. Both the negative and positive impulses from the previous weeks were too weak to push
EURPLN out from 4.145-4.23 area, while bond yields have changed only slightly. This week will be rich in events,
which can provide a strong impulse for domestic FX and FI markets, but it will not come from the domestic data.