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A day of a strong ruble and positive sentiment (Daily analysis 11.08.2020)

11 Aug 2020 14:41|Bartosz Grejner

Trading on Tuesday morning was accompanied by positive sentiment. The main European stock exchange indexes were increasing by about 2-3%, and the depreciation on the treasury bonds gave today's session a "risk on" character, i.e. an increased appetite for more risky asset classes. The zloty stabilised.

Future brings hope but present worries

In such conditions, the dollar usually does not do very well and it was no different today in the morning. Although the euro/dollar quotations fell gradually during the session in Asia to about 1.1722, close to the bottom line for two weeks, demand for the dollar has clearly declined since trading began in Europe. Around midday, the EUR/USD exchange rate reached again 1.18, which is about 0.4% above yesterday's closing.

The positive sentiment in the market is sustained by the incoming favourable stimuli today. The ZEW economic sentiment index for Germany rose to 71.5 points in August, the highest level in 16 years. This turned out to be a big surprise, as a slight decline was even expected compared to July - from 59.3 to 55.8 points.

While expectations have increased very strongly, there has been a minimal decline in the current state of the German economy. In his comment on the report, the head of ZEW Achim Wambach wrote that "the still very poor earnings expectations for the banking sector and insurers regarding the coming six months give cause for concern."

The ruble appreciates and the zloty stabilises

Another positive stimulus was provided by Russian President Vladimir Putin, who announced the registration of the first coronavirus vaccine. This development may be seen as propaganda (the institution producing the vaccine started the third phase of its testing only last week) and may be seen as dangerous by some pharmaceutical companies (associated in the Association of Clinical Trials Organizations).

However, today it matched well the general sentiment on the market, to which the Russian currency also reacted. The ruble was one of the strongest currencies of the countries emerging around midday, gaining about 1% to the dollar and 0.5% to the euro.

The current condition of a weaker dollar and the demand for more risky asset classes (thus also emerging country currencies) continues to support the zloty. Not much is happening in the case of Polish currency quotations in the past days: the EUR/PLN is stabilising at around 4.40, the USD/PLN is moving in the range of around 3.73.3-75. The stabilisation will most likely also be a story for the next few weeks, at least until the end of the summer.

An increase in fluctuation is expected on Friday when we will know the set of data from China and the USA. Particularly important for the market will be data on retail sales, which can determine what kind of demand is created by consumers and how the path of growth of activity in economies after the exit from the closure (with a correction for those states of the USA that have restored the restrictions).

11 Aug 2020 14:41|Bartosz Grejner

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.

See also:

10 Aug 2020 18:20

Two days of the pound's increased volatility (Afternoon analysis 10.08.2020)

10 Aug 2020 15:01

Dollar goes up slightly (Daily analysis 10.08.2020)

7 Aug 2020 17:49

Number of new payrolls increases but still slower than in July (Afternoon analysis 7.08.2020)

7 Aug 2020 12:21

German industry does not disappoint (Daily analysis 7.08.2020)

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