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Dollar's appreciation halted (Afternoon analysis 9.09.2020)

9 Sept 2020 17:34|Bartosz Grejner

The US currency depreciates after reports that members of the European Central Bank's monetary committee have become convinced that the eurozone economy is returning to its pre-pandemic condition, and this may reduce the need for additional stimulation. The zloty benefits from a positive sentiment and a slight weakening of the dollar.

Wednesday was marked by improved sentiment. This was in contrast to previous days when a strong increase in risk aversion was observed. The main European market indexes were gaining about 2% each and in the USA a little less - less than 2%. Together, however, this emphasized a positive sentiment.

Leaks from the bank cut the dollar's wings

Until the early afternoon, there was a slightly stronger dollar. The EUR/USD quotations oscillated around 1.1760, which is the lower level of the last month. In the afternoon, however, the situation changed and the dollar started to lose again, and the main currency pair increased to about 1.1830, 0.4% above the level from yesterday's closing.

The factor that most likely weakened the dollar and at the same time strengthened the euro is hidden in the reports by Bloomberg. The publication concerns macroeconomic projections, which the European Central Bank will publish only tomorrow.

According to those familiar with the topic, the latest projections will contain only minor changes compared to the previous ones from June this year. The ECB's monetary committee members themselves were to gain a deeper conviction that the economy was returning to the point before the pandemic. The failure to meet some of the concerns about threats to activity may, in turn, mean a reduction in the need for additional stimulation later in the year.

This would be a positive stimulus for the euro, which is why the market has reacted today. Will the ECB's message really strengthen the European currency? The details and the full impact of tomorrow's statement and the press conference of Christine Lagarde, President of the ECB, will have to wait.

Tomorrow there might be significant fluctuations

Lagarde has been very cautious in her statements so far. Therefore, the change to a positive attitude seems to be limited, especially in the context of the increasing disease pace in some eurozone countries and uncertainties. They are related to a potential wave of the disease in the autumn-winter period, negotiations on the UK trade agreement with the European Union, the US presidential election.

Tomorrow we can expect a strong increase in currency fluctuations during the publication of the statement and the press conference.

Today, however, the afternoon weakening of the dollar and the domination of positive sentiment helped the zloty. The EUR/PLN exchange rate fell to about 4.44 in the afternoon, and the USD/PLN from 3.79 to about 3.76. However, if the tone of tomorrow's ECB's announcement is not so positive, the dollar may potentially strengthen slightly again, also increasing supply pressure on the zloty.

9 Sept 2020 17:34|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:

9 Sept 2020 13:10

Sentiment calmed down (Daily analysis 9.09.2020)

8 Sept 2020 18:06

Oil depreciates, the zloty incurs losses, and the sentiment is worse than yesterday (Afternoon analysis 8.09.2020)

8 Sept 2020 15:41

The pound is under pressure (daily analysis 8.09.2020)

7 Sept 2020 18:55

The zloty pared some losses (Afternoon analysis 7.09.2020)

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