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Dollar closed in a narrow fluctuation range (Afternoon analysis 16.09.2020)

16 Sept 2020 18:47|Bartosz Grejner

While waiting for the Federal Reserve events in the evening, the increased activity of the US investors in the afternoon boosts demand for the dollar. However, it is still within a limited fluctuation range. The pound pares some of the losses - the GBP/USD reaches 1.30, and the GBP/PLN 4.89, but the British currency is still subject to significant fluctuations.

The dollar can breathe a bit in the afternoon

For most of the day, until the session on the New York Stock Exchange started, we observed a weaker dollar. However, after the opening of the trading session, along with an increase in the activity of the US investors, the EUR/USD pair fell from about 1.188 to about 1.181 at a fairly fast pace.

This was about 0.25% below yesterday's closing and the lowest rate since last Friday, but it is still within a rather limited fluctuation range. And despite the afternoon's strengthening, these levels also continue to indicate a continuing weakness of the dollar, which is not giving up.

This increased volatility observed in the case of the dollar in the afternoon is mainly due to market participants' expectations of evening events related to the Federal Reserve. While little may ultimately change in the context of dollar quotations, the statement, the new economic projections, the "dot plot" (members' expectations of future interest rates) and the conference of Fed chair Jerome Powell, may provide a significant increase in volatility.

This afternoon, the dollar could also strengthen to some extent due to the comments of White House Chief of Staff Mark Meadows, who said that President Donald Trump positively received the negotiations on fiscal stimulation (between Democrats and Republicans). Part of the weakness of the dollar in the last week is a result of how quickly a consensus on fiscal stimulation in the EU has been achieved, while negotiations continue in the US Congress.

The pound pares part of the strong drop

Despite this afternoon's impulse, dollar changes were relatively limited, looking at the last two weeks or so. This also means that the EUR/PLN and the USD/PLN quotations are also closed in limited ranges, about 4.44-4.45 and 3.75-3.76 this afternoon respectively. These narrow fluctuations in the case of the zloty are also the effect of no significant modification of sentiment on the market.

Another story remains the constant changes in the value of the pound. On Wednesday afternoon, the cable rate, i.e. GBP/USD, reached the key level of 1.30, accelerating the appreciation of the previous two days. However, for the time being, this is only just a partial recovery from the losses incurred in the last week due to the increased risk of "hard Brexit" (i.e. trade with the EU under WTO rules, instead of negotiating a new trade agreement). This risk has not disappeared, and the incoming information moving strongly the market is likely to intensify, so despite an increase in the GBP/PLN pair to 4.89 (still below 4.80 on Friday), the exchange rate may fluctuate significantly in the coming weeks, with a tendency towards supply pressure (until an agreement is reached, which is currently far from being concluded).

16 Sept 2020 18:47|Bartosz Grejner

This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without acknowledgement of the source is prohibited.

See also:

16 Sept 2020 13:11

The dollar is weaker before the evening events (Daily analysis 16.09.2020)

15 Sept 2020 14:21

Set of positive data from China and Germany (Daily analysis 15.09.2020)

14 Sept 2020 17:17

Pound tries to pare some losses (Afternoon analysis 14.09.2020)

14 Sept 2020 13:11

Demand for the euro still present (Daily analysis 14.09.2020)

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