Economic conditions that support the zloty and the koruna (Afternoon analysis 12.08.2020)

Inflation in the USA is rising faster than expected. The dollar depreciates, but there are no significant changes. The zloty and the Czech koruna are the strongest currencies of the emerging countries. The EUR/PLN exchange rate falls slightly below 4.40 PLN.

Important data but not for the time being

On Wednesday afternoon, the main currency pair, i.e. EUR/USD, fell from about 1.172 in the morning to just over 1.18 in an hour and a half after the session began on the New York Stock Exchange. Similar values were also observed in yesterday's quotations.

As a result, there is little change, and even macroeconomic data, which would normally cause a significant increase in dollar fluctuations, are practically ignored.

This afternoon the Bureau of Economic Analysis (BEA) published data on US consumer inflation (CPI) in July, which clearly exceeded market expectations. The headline inflation index was 1.0% per year (0.3 percentage points above consensus). The more important index - the core one, excluding the impact of energy and food - amounted to 1.6%, although the inflation rate was expected to be 1.1%.

The information on CPI inflation is not included by the Federal Reserve, which uses the PCE, but the above data tells a lot about price trends in the economy.

Interest rates will remain low for a long time

Currently, these trends are distorted by the impact of the pandemic, and the importance of statistics is limited by the fact that the Fed intends to maintain interest rates at current levels (0-0.25%) for a longer time. Inflation may become slightly more important probably only at the beginning of next year when much more is known about the chances of the economy returning to the pre-pandemic state.

The dollar lost slightly after the publication of inflation statistics, although under normal circumstances these would be positive data for the US currency. The USD/PLN exchange rate fell to about 3.7250 in the afternoon, i.e. to the bottom line since last Friday.

The conditions conducive to the Polish currency remain on the broader market. Increases in equity prices are accompanied by a depreciation of treasury bonds. Therefore, the zloty together with the Czech koruna once again ranks at the top of the emerging countries' currency classifications, which gain most in relation to, among others, the dollar, the pound or even the globally strong euro. However, the profits are not significant and fall within the ranges observed in previous days. The EUR/PLN exchange rate was below yesterday's close (approx. 0.2%) in the afternoon, around 4.398 PLN.