The supply pressure on the dollar increases. The USD/PLN pair is the lowest in two years, and the CHF/PLN pair in five months. Data on activity in the industrial sector for August show uneven growth in Europe. Later in the day, we will receive the final PMI data from IHS Markit for industry in the USA, as well as more relevant PMI data from the ISM institute, which may increase volatility of the US currency.
Industry in Poland slows down
On Tuesday morning, IHS Markit published PMI data for corporate sectors in September (the final data for the largest economies, the first for the rest). The aggregate index for the eurozone turned out to be in line with the preliminary reading and amounted to 51.7 pts. However, in the individual economies of the region and other EU countries, the data were slightly below expectations, showing a varying pace of recovery.
The industry's PMI in Italy rose to 53.1 points in August, compared to an expected 52 points. The activity in this sector also surprised positively in France, where the index was still higher than the initial estimates by 0.8 pts., rising to 49.8 pts. and only marginally below the line separating recession from growth (50 pts.).
A different story was observed in Spain, where from a relatively strong increase in activity (53.5 points) there was the first decline since April, and it was straight into a recession in the sector (although minimally) to 49.9 points. If we look at the region's economies, the picture is also not clear: PMI in Hungary rose from 51.1 pts. to 52.8 pts., while in the Czech Republic and Poland, the activity in the industry fell to 49.1 and 50.6 pts., respectively.
In both cases, the readings were below expectations, although the disappointment was greater in the case of the Polish industrial sector, whose activity growth slowed down significantly in August (from 52.8 pts.), against expectations of slight improvement. Such a state of Polish industry in August was largely influenced by a lack of new orders and a slowdown in production growth.
The data on industrial activity may suggest that, as expected at the beginning of the pandemic, activity between the economies will vary, and that this pace may fade somewhat in some regions of Europe after the first months of "easy growth".
Weaker dollar, weaker franc
Today, the PMI data had a limited impact on what is happening on the market. The trend of the dollar depreciation continues, which reached over two years' lows in relation to the basket of the main currencies during the session in Asia. The quotations of the main currency pair, i.e. EUR/USD, increased in the early morning hours to nearly 1.20, and remained just below this level around midday.
The dollar's weakness was also reflected in the improvement of the zloty's condition against the main currencies. The USD/PLN exchange rate fell below 3.66 today, marking the new lows in just over two years.
The combination of supply pressure on the US currency and positive sentiment on the broader market is now also causing a marked weakening of the Swiss franc. Today, the CHF/PLN exchange rate dropped to around 4.04, the lower limit of the exchange rate since late February and early March.