Calm Friday before an important week (Afternoon analysis 24.04.2020)

The data are bad but not catastrophic: orders for durable goods in the US fell by more than 14% in March but excluding transport by only 0.2%. Limited volatility in the currency market before the week of central bank meetings and GDP data.

Limited fluctuation range may widen

After the publication of data that were much weaker than expected and indicated the disastrous climate of German companies, the sentiment on the broaden market did not change significantly. The main currencies' quotations move within a limited fluctuation range, which may partly result from market participants' expectations for next week's central bank actions (e.g. the Fed and the ECB).

In the afternoon, however, macroeconomic data from the USA were published, and they were not as bad as those from Europe. While orders for durable goods fell 14.4% on a monthly basis, 2.4% below expectations, the more significant core order index (excluding transport orders) fell by only 0.2% compared to an expected 6.5%. Half an hour after the beginning of the New York market session, the University of Michigan released its final consumer sentiment index for the US in April. It turned out to be slightly higher than the preliminary reading (71.8 vs 68.0 points), but these are still the lowest levels of consumer sentiment since the back of 2011.

Based on market behaviour, the macroeconomic data coming in recent days has had an unusually limited impact on the market and has even been ignored to some extent. This is probably because we are dealing with the historic data, and the market is already pricing the gradual easing of restrictions in some countries. A factor protecting against a significant deterioration in market sentiment is the stimulus measures taken by central banks, which have provided enormous liquidity to the market. The prolonged restrictions in major economies, together with further disastrous data (especially for Q2) could potentially worsen these relatively (to the current situation) good sentiment.

In this case, we would probably observe a rapid dollar appreciation and sales pressure on the emerging countries' currencies, including the zloty. As long as the sentiment is not subject to fundamental modifications, the zloty's fluctuations in relation to the basic currencies should also be limited. Looking ahead to the following months, macroeconomic readings from the largest European economies will be important in this respect, which will be followed by a more accurate assessment of the impact on GDP as well as how the US will deal with the pandemic. The continued closure of the economy and reduced consumer demand could lead to a significant deterioration in sentiment in the financial market, negatively affecting the zloty.

On Friday afternoon, the zloty remains stable, moving in a limited fluctuation range and will probably remain so until the end of the day. The Polish currency may be affected by next week's events, which may introduce significant fluctuations to the entire market.

Next week's preview

Next week may be important for market participants. On Wednesday, decisions on monetary policy and possibly additional stimulation to the economies will be made by the Federal Reserve (Fed) and a day later by the European Central Bank (ECB). The ECB may be of particular interest, given that yesterday's summit of European leaders did not result in a consensus on additional stimulation of the European economy. These events can cause very significant fluctuations in almost all asset classes, including currencies.

The large fluctuations can also be provided by the readings of US and eurozone GDP growth pace, which will be published on Wednesday and Thursday, respectively. Although this will be the data for Q1, and the biggest impact of the virus will most probably be in Q2, significant decreases are expected: -3.9% q/q (annualised) for the US and -3.5% for the eurozone. Deeper-than-expected declines may worsen sentiment, although the attention of market participants should be focused on central bank actions.