Data from Poland fail to meet expectations (Daily analysis 21.09.2020)

Increased risk aversion causes a sale off on the equity market and increased demand for the US currency on Monday. The zloty is under increased pressure - the USD/PLN exceeds 3.80, and the EUR/PLN is closer and closer to 4.50. The pressure on the zloty may intensify if the appreciation pressure on the dollar rises (so far it is not significant).

Concerns keep rising

The new week started with weaker moods. Sentiment on the broader market worsened due to the incoming signals of an increase in coronavirus infection in Europe. This reinforces the fears of market participants to impose again enhanced restrictions, also backed by media reports on this issue.

According to Bloomberg, Chris Whitty, the Chief Medical Officer of the British government, was to warn Prime Minister Boris Johnson today that Britain is at a "critical point". The German health minister, in turn, warned today that the observed trend in the disease is worrying.

Such reports reinforce the already existing concerns on the market about the next wave of the autumn-winter disease. The upcoming US elections (early November) further add to this uncertainty, which may additionally strengthen risk aversion. With massive drops of more than 3% and the largest since the end of July in the main indexes in Europe, the demand for the dollar has also strengthened.

The dollar is stronger, but the pressure may increase

The US currency usually does well in such moments, being one of the safe havens. The euro/dollar exchange rate fell just below 1.18 but did not even come close to the Thursday lows (just under 1.1730). This, however, was enough to clearly depreciate the zloty, even despite some sudden appreciation of the dollar on the global market.

Today, the USD/PLN exchange rate exceeded 3.80, for the first time since July 24th, while the EUR/PLN exchange rate, exceeding 4.48, has risen to its highest level since July 20th, just like the CHF/PLN exchange rate, which rose to nearly 4.17. Such significant changes cannot be seen in the case of the GBP/PLN, which did not reach 4.90 today, but this is due to the general weakness of the pound caused by uncertainty around Brexit (which may also increase in the coming weeks).

Today, macroeconomic data from the Polish economy did not help the zloty either. Retail sales dropped unexpectedly by 2.6% on a monthly basis in August - and although the growth pace was expected to slow down from 6.4% in July, sales were still expected to increase by 0.4%. This was the first drop since the slump in March and April, which may underline the fact that the period of "easy" growth has already passed.

Fears that we are approaching the autumn (another wave of the virus, US elections) may prevent the zloty from paring the losses. We are not observing that the dollar is gaining significantly on the global market yet - if the demand for the US currency comes back, the zloty may be under increased supply pressure and lose against the main currencies.