Dreadful data without any impact on the market (Daily analysis 13.05.2020)

Strong drops in GDP of industrial production in the UK and the eurozone are already discounted by the market. The zloty remains stable, although the Fed Chair's address in the afternoon may increase the volatility somewhat.

The most important macro data (CET - Central European Time). Surveys of macro data are based on information from Bloomberg unless noted otherwise.

• 3:00 p.m.: Webinar hosted by the Peterson Institute with Jerome Powell, the Chair of the Federal Reserve.

Warning from the USA

Last night, there was a slight deterioration of sentiment in the broader market. It was related to warnings about the negative effects of opening up the economy to the US from yesterday's conference call in Congress. No new data or new information has emerged, but the market currently does not have a lot of reference points to assess the path of recovery and the prospect of a second wave of illnesses and the re-closure of economies in autumn-winter which may have frightened some investors.

Mainly the equity market reacted, which is still observed in today's declines in European markets. It is, however, distant from the state of the economies; and the bond or currency market has adopted yesterday's conference with greater calmness. With this in mind, however, a potential strong sellout on the equity market (in the short term) could negatively affect the general sentiment, reducing the risk appetite and resulting in sales pressure on assets perceived as more risky, including the currencies of emerging countries, such as the zloty.

Better than expected data, but they have never been worse

The currently stable foreign exchange market and the dollar support the limited fluctuation range observed among major currencies, including the zloty. The EUR/USD quotations remain below the 1.09 boundary, about 1.0850 around the midday, less than 0.1% above yesterday's closing. This small fluctuation range highlights the fact that the market is waiting for the effects of the recovery: what shape it will take and whether demand will keep up with supply (return to work, which seems the easiest).

More macro data from Europe were published in the morning. The Office for National Statistics (ONS) published a set of data that highlighted the depth of the recession in the UK. GDP in March contracted by 5.8% on a monthly basis, and in the entire Q1 by 2.0%. This is a slightly lower scale of decline than the market expected: -7.9% and -2.6% respectively. The scale of industrial production decline (-8.2% y/y) in March also turned out to be slightly less than expected. Eurostat, on the other hand, reported that industrial production shrank by 12.9% y/y in March, also slightly less than the market had expected.

Data from both the UK and the eurozone are obviously tragically weak, even if they have turned out to be slightly higher than the consensus - in most cases, these are the biggest falls ever recorded, exceeding the crisis of a decade ago. However, the market is now virtually completely insensitive to these data. This is because economies are beginning to open up. The market is focused on this, and it is most likely that only the data for May-June, showing the course of recovery, will be able to introduce greater fluctuations.

Will the dollar move today?

Due to this high resilience of the market and the anticipation of the first effects of the recovery, the zloty's quotations are still in a very limited fluctuation range. The USD/PLN exchange rate practically constantly fluctuates around 4.20, and the EUR/PLN exchange rate most frequently oscillates between 4.54 and 4.56.

The event of the day will be today's speech (in the form of a video conference) by the Head of the Federal Reserve, Jerome Powell, in a webinar hosted by the Peterson Institute. We can expect an increase in fluctuations at the time of his speech, especially as regards the dollar, although fundamental changes are unlikely to be expected.