Calm day before a week full of volatility (Afternoon analysis 27.04.2020)

Limited changes in the currency market before key events later in the week. Positive market sentiment and a slightly weaker dollar support the zloty today. However, volatility has remained relatively low for about three weeks.

Central banks in the spotlight

On Monday afternoon, the broader market was dominated by positive moods, with which the quotations started today. The positive sentiment is mainly caused by the liquidity provided by central banks and the announced gradual easing of restrictions in some countries. This was also supported by Bloomberg reports that tomorrow the European Commission is planning to announce aid measures for banks to ensure the continuity of granting loans (including the modification of leverage).

Another aid line for the economy is definitely received positively by the market, although the volatility has remained limited today. This is partly a result of a practically empty macroeconomic calendar, and partly of important events later in the week. The fluctuations will likely increase. The focus may be on the central banks of the USA (Fed) and the eurozone (ECB), which are largely responsible for the improved sentiment on the broader market in recent weeks.

For most of the day, the main currency pair's quotations remained within the range of approx. 1.080-1.085, away from the bottom line at 1.07. Further dominance of positive sentiment and the globally weaker dollar allowed the zloty to recover, especially in relation to the franc (the CHF/PLN quotations fell below 4.28). However, the fluctuation range has remained very limited practically for three weeks. Macroeconomic events this week (Fed and ECB, GDP, ISM index on Friday) may significantly expand it, although how the second quarter will develop (in economic terms) may have a greater impact on the Polish currency.

Tomorrow's preview

At 2:30 p.m., the Bureau of Economic Analysis (BEA) will publish data on the US trade balance of goods for March. The median of market expectations indicates a reduction of the deficit by 4.9 billion USD to 55 billion USD. However, the April data from the Conference Board (CB) may attract more attention. The market consensus assumes a sharp decline from 120 points to 88 points in March. This would be the lowest level in six years, and any sign of an even deeper drop in consumer sentiment could take some optimism out of the market, strengthening the dollar and negatively affecting risky asset classes. However, volatility among the main currencies should be relatively limited tomorrow, given the much more significant events in the following days (among others, decisions of the Fed and ECB, GDP in the US and the eurozone).