The euro records monthly highs in relation to, among others, the dollar and the yen, highlighting the positive attitude of investors to the common currency area. It results from a fairly effective fight against the pandemic. The re-imposition of restrictions in California raises further problems for economic growth in the USA. The zloty is supported by the strong euro and the weakness of the dollar.
Tuesday started with a slight deterioration of sentiment in the market. This was reflected primarily in drops in the main European market indexes. This was a consequence of the falls that started at the end of the session in the USA, but also a reaction to the negative information that came today.
US: virus strikes on one side and Chinese sanctions on the other side
The relatively good sentiment of the past few weeks has been based primarily on the path of activity growth from the closure of the economies. Therefore, information about potential threats to this path may cause concerns among market participants, causing increased risk aversion.
Yesterday evening, the market received a negative stimulus in the form of news from California, where the restrictions are coming back again. Bars, pubs, cinemas, among others, are being closed down, which casts a shadow over the already obstacle-filled recovery path of the US economy. Today, in turn, we got another proof of the worsening relations between the USA and China. Bloomberg Agency reported that the Chinese government would impose a sanction on the US company Lockheed Martin.
Geopolitical tensions are increasing, and this process may intensify as the US presidential election in November approaches. However, the foreign exchange market is responding calmly to these worrying reports. We are not seeing any increase in the dollar. On the contrary, the US currency is slightly depreciating. The euro is the clear winner in recent days.
In a world of currencies, the euro has its moments of glory
The euro benefits from the fact that Europe is coping well with the pandemic. Today, the EUR/USD and the EUR/JPY rose to their highest level in a month, and the EUR/CHF exchange rate approached the upper limit in a month. The good condition of the euro is also good news for the Polish currency. The zloty appreciated in relation to the main currencies around midday.
Although the EUR/PLN quotations for the second day in a row came close to 4.50 (approx. 4.4960), they went back to around 4.48 in the afternoon. This is still quite a high level, and despite the weakness of the dollar, which is favourable to the zloty, the risk aversion in the broader market may cause upward pressure on the pair.
Later in the day, we will see the data on consumer inflation (CPI) in the USA. Although volatility may increase slightly at the time of publication, especially of the dollar, these data are of limited importance during the pandemic.