After the Eurogroup, it is time for PMI (Afternoon analysis 21.07.2020)

The euro appreciates: the EUR/USD rate is approaching its highest level since January 2019. The zloty is also supported by internal data, and the EUR/PLN exchange rate is falling below 4.43.

Positive sentiment continues to dominate

Tuesday's quotations were held in positive sentiment. This was a result of the compromise reached on the 750 billion EUR programme to rebuild the EU economies. The euro was appreciating in the afternoon, the EUR/USD exchange rate rose to about 1.1495, i.e. to the highest level since March 9th and a step from reaching the highest level since January 2019 (approx. 1.15).

The inflow of positive information on the results of the subsequent testing phases of coronavirus vaccines also supports current positive sentiment. There is a lack of events on the horizon that could make these good moods significantly worse. Only on Friday, we will get to know the first relevant information.

IHS Markit will publish the preliminary data of the PMI activity indexes in the industrial and services sectors of the eurozone in July as well as its largest economies in the morning. In all cases, the market is expecting an improvement in July and even an exit from recession into the growth phase (except for German industry).

Given the positive effects of coping with the pandemic in Europe, a negative surprise is not expected. Therefore, it is likely that the euro will maintain its high levels. It may even gain more if the figures turn out to be slightly above expectations. However, it should be remembered that after the first months of strong activity in May and June, increases in the following months will be less impressive.

The zloty is getting closer to the main currencies

For the Polish zloty, it is still a favourable macroeconomic environment, which is also supported by solid data from Poland, e.g. on industrial production and retail sales in June. The data for July will also be important, but it can already be assumed that both the supply and demand aspects are on the right track. This is a positive signal for the zloty.

The good condition of the zloty was reflected in the afternoon's quotations. For the first time since mid-June, the EUR/PLN exchange rate fell below 4.43 and the USD/PLN exchange rate, going below 3.86, fell to its lowest level since March 12th. The calendar of scheduled events for the rest of the day is practically empty, so no major changes in the valuation of the zloty in relation to the main currencies should be expected.