Dollar depreciates again (Daily analysis 24.08.2020)

Only a little left of Friday's strengthening of the US currency. The dollar depreciates due to the domination of positive sentiment, following reports of treatment for coronavirus in the US and potentially slightly better relations with China. The zloty is somewhat stronger, and the EUR/PLN is back to 4.40.

Optimism does not favour the dollar

The week began with positive sentiment on the broader market. The dominance of it was primarily due to optimism in connection with reports of the US FDA (Food and Drug Administration) approved to increase the availability of coronavirus treatment using plasma from people who have undergone this disease.

Although full clinical trials have not yet been completed, market participants respond positively to such reports in the current atmosphere. And any information that supports this view reinforces the current dominant market trend, such as media reports quoting anonymous White House sources that the ban on doing business by American companies with owners of the Chinese WeChat application will not be as broad as it was feared.

This may further reduce the fear of tense US-China relations. Although it may seem that the market reaction is a little too optimistic for the information, the level of risk aversion was much lower in all asset classes. This resulted, among other things, in even slightly more than 2.5% increases in the main market indexes in Europe, as well as losses for the dollar, when investors have a greater appetite for risk.

The zloty appreciates, but still moves within the limited rage

After a drop to around 1.1750 on Friday, the euro/dollar quotations rose to about 1.1850 today, cancelling most of the profits generated by the dollar on Friday after better-than-expected macroeconomic data from the US (and worse from the eurozone). The return of supply pressure on the dollar on Monday also helped the currencies of emerging countries, which usually do well in such conditions as today.

This includes the zloty, which appreciates in relation to the main currencies. The EUR/PLN exchange rate dropped to around 4.40 and USD/PLN to around 3.71. However, if we look at recent weeks, we can see that the zloty is within a limited range of volatility, without a strong trend in either direction.

The zloty is currently in relatively good condition, but such closure in a narrow fluctuation range is a consequence of the market's expectation for a little more clarity about the coming months, which may disturb the current status quo somewhat (including a potential next wave of disease in autumn-winter time, the US elections in November). The calendar of planned, significant macro events is empty today. Therefore no significant fluctuations should be expected, and the zloty should stabilize around current levels.