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Dreadful data with limited impact on the pound (Daily analysis 12.08.2020)

12 Aug 2020 16:08|Bartosz Grejner

Data from the UK economy demonstrate the largest-ever drop in GDP. The pound is depreciating, but these are minimal losses.

It is bad, but it was supposed to be even worse

In the morning, a set of macroeconomic data from the United Kingdom was presented. GDP in the Islands contracted in the Q2 by 23.4% on a quarterly basis and by 21.7% on an annual basis, with the deepest falls in both cases at least since 1955, when these statistics were developed.

In both cases, however, the results were slightly better than the market consensus. In July, monthly GDP growth of 8.7% and industrial production of 9.3% were also above expectations. Overall, the large part of the data set for Q2 and July exceeded expectations. However, the future of the labour market remains a matter of concern.

In the next part of the year, programmes supporting the maintenance of employment will expire. The fear is that this may increase unemployment and consequently reduce consumer demand. This could negatively affect the path of economic activity, which in Europe has been one of the most affected by the pandemic.

The pound was affected but just a little

The pound was weakening slightly today, the GBP/USD exchange rate fell to 1.30, the GBP/PLN exchange rate dropped to around 4.86, and the EUR/GBP quotations rose just over 0.90. However, these were not fundamental changes and were within the ranges observed in previous days.

Currently, the market has a very limited response to past months' data, looking ahead to the autumn period, which may prove to be crucial for the return of the UK economy (and not only) to pre-pandemic conditions.

The zloty appreciates when the dollar goes down in red

The main currency pair quotations, i.e. the EUR/USD, are now in the range of approx. 1.172-1.18, and those levels are well known from the previous days.

The zloty's situation remains unchanged, as does the trend-setting situation of the dollar—the Polish currency benefits from the dollar weakness. The lack of fundamental changes in the dollar's valuation stabilises the zloty among the top emerging currencies in the last month, just behind the Czech koruna and the forint. The USD/PLN quotations are in the range of approx. 3.73-3.76 and the EUR/PLN fluctuates around 4.40. The lack of significant events until the end of the day suggests stabilisation around current levels.

12 Aug 2020 16:08|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:

11 Aug 2020 18:37

Will S&P500 break a record? (Afternoon analysis 11.08.2020)

11 Aug 2020 14:41

A day of a strong ruble and positive sentiment (Daily analysis 11.08.2020)

10 Aug 2020 18:20

Two days of the pound's increased volatility (Afternoon analysis 10.08.2020)

10 Aug 2020 15:01

Dollar goes up slightly (Daily analysis 10.08.2020)

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