Data from the US disappointed the market (Afternoon analysis 17.07.2020)

The Friday afternoon was held in a similar sentiment in the currency market as in the first phase of the day. The euro continues to be in good condition as the market awaits the effects of the European leaders' meeting on economic recovery funds. In the afternoon, slightly less optimistic data from the USA came in.

US consumers already less optimistic

At first, we gained an insight into the June readings from the real estate market. The homes construction starts increased by 5.7% on a monthly basis, below the expected 7.9%, and building permits issued rose by 2.1%, also disappointing the 6.3% growth expectations.

The preliminary data of the University of Michigan consumer sentiment index in July might have been a little more worrying. It decreased from 78.1 points to 73.2 points, although a minimal increase to 79 points was expected. The overall result was most heavily influenced by consumer expectations for the following periods, which fell sharply around the lows observed in May, as a result of the re-imposition of restrictions and/or suspension of the opening of individual states.

In a recent report, the University of Michigan writes that "unfortunately, [further] declines are more likely in the months ahead as the coronavirus spreads and causes continued economic harm, social disruptions, and permanent scarring". It also points to the urgent need for fiscal support, something that will be discussed in Congress.

If we compare this with the situation in Europe, it is clearly worse. Therefore, the euro is in good condition. Even if no agreement is reached on the 750 billion EUR aid fund for the economies, the risk of its final failure is limited.

Over the next few days or weeks, it is rather good news for the market and still prevailing positive sentiment. The situation may become a little more complicated in the second part of the year, in the autumn, when the US elections will be more prominent, with geopolitical tensions rising in recent weeks and a potential second wave of the pandemic.

Currently, conditions are favourable for the zloty, which was just behind the South African rand and the Czech koruna - the strongest of the emerging countries' currencies. Apart from favourable external conditions (e.g. weak dollar, increased appetite for risk), the Polish currency was also supported by higher than expected increases in employment and wages in enterprises in Poland in June.

In the afternoon, the USD/PLN exchange rate fell below 3.92, and the EUR/PLN exchange rate moved in the range of approx. 4.47-4.48 and by the end of the day, no significant changes are expected. The aforementioned fluctuations may increase on Monday when we will know the effects of the meeting of European leaders. However, the probability of a significant weakening of the zloty seems to be very limited.