A cloud of pessimism over the United States (Afternoon analysis 28.07.2020)

Consumer confidence in the US fell more sharply in July than predicted. Expectations for the next six months were particularly disappointing. There was a drop even below April's level. The zloty lost a large part of yesterday's profits but remains quite strong in terms of the whole month.

The Americans stopped looking at the bright side

In the afternoon, the US Consumer confidence index data for July were released. These confirm the rather bleak prospects of the economy returning to its pre-pandemic level. This is significantly influenced by the re-imposed restrictions in some states.

According to the Conference Board data, US consumer confidence fell from 98.1 to 92.6 points, 2.4 points deeper than expected. While the assessment of the current situation has improved compared to June, expectations drastically dropped, even below April's level. The CB report states that the percentage of consumers expecting the situation to improve in the next six months fell from 42.4% in June to 31.6% in July. In turn, the percentage of those who expect the situation to get worse rose by 4.1 percentage points to 19.3%.

The consequences of re-imposing restrictions also affected the expectations of Americans regarding the situation on the labour market. Only 30.4 percent of consumers expect more jobs in the coming months, while in June it was still 38.4 percent. At the same time, the percentage of those expecting job cuts increased from 15.2 to 19.3 percent.

These data provide quantified evidence of market participants' concerns about the shape of the US economic recovery path. It is already clear that it will not be as simple as expected a few weeks ago. Instead, we should rather anticipate bounces and twists, and this is also indicated by the dollar, which has been significantly losing its value in the past days.

The zloty among the top five

Although the dollar's depreciation over the past few days has stopped today, the imbalance in terms of the impact of coronavirus on the economy between Europe and the US continues to keep the EUR/USD exchange rate close to its highest level since September 2018 (over 1.17). The positive attitude of investors towards the EU region also allows the zloty to maintain its good condition, even if today the Polish currency returns part of the profits generated yesterday.

However, if we look at the last month, the zloty is among the top five best-performing currencies in the group of emerging countries. Within four weeks, the Polish currency gained about 5.9% against the dollar, 2.6% against the franc, 1.4% against the euro and 1% against the pound. The current condition of the US currency is also demonstrated by the fact that in the context of the last year, the zloty loses about 2-6 percent to the euro, the franc or the pound, but gains 2 percent to the dollar. On Tuesday afternoon, the USD/PLN exchange rate moved just above 3.76 PLN, cancelling most of the profit generated yesterday.