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Franc at its lowest level in three weeks (Daily analysis 28.04.2020)

28 Apr 2020 11:57|Bartosz Grejner

Positive sentiment in the broader market weakens the dollar and the franc. The EUR/CHF exchange rate is above 1.06, and the CHF/PLN exchange rate drops close to 4.27. Movements are limited, but this may change in the coming days.

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

  • 2:30 p.m.: US trade balance of goods in March (estimates: -55.0 billion USD).
  • 4:00 p.m.: US consumer confidence index in April by Conference Board (estimates: 87 points).

Positive sentiment still observed

More economies, including Spain, Italy, Switzerland, are gradually easing restrictions or announcing such movements, joining other countries that have already done so recently, including Austria, the Netherlands and Germany. Combined with the declining rate of new cases, market participants receive the positive stimulus they need so much.

Countries may also look forward to restarting their economies as soon as possible after they have practically halted them. However, each country faces a tough decision to balance the lifting of restrictions and protect its citizens from the virus and the next wave of it, which could potentially wipe out the lion's share of the precautions taken in recent weeks.

However, this balanced approach will prevent a rapid return to pre-pandemic economic levels. As some economies open up, another potential problem arises: increasing supply may not find sufficient demand coming from consumers.

The markets up, the dollar down

The market is not particularly concerned about the aforementioned problem, as it responds positively to reports of the opening of economies. The main market indexes in Europe continued yesterday's growth and by midday were at their highest level in the last month and a half. The equity market is now quite significantly detached from the current economic situation, but it is a good indicator of prevailing sentiment.

These positive sentiments have also translated into a slightly less sensitive currency market. During the morning trading, there were decreases in the value of the dollar, the franc and the gold, among others, emphasising the positive moods. Changes in the main currencies continued to be limited, but the weakening of the franc allowed the EUR/CHF exchange rate to move away from the nearly five-year low point and to increase above 1.06 for the first time since early April. The main currency pair (the EUR/USD) also increased to around 1.0870, although the volatility range until midday was practically in line with what was observed yesterday.

The mentioned weakening of the Swiss currency on the global market resulted in a drop in the CHF/PLN exchange rate to about 4.2730, the lowest level in three weeks. The dollar against the zloty remains just below 4.20, and the euro fluctuates around 4.54. The pound's quotations to the zloty increased to around 5.22 (the highest level in 11 days), as a reaction to the strengthening of the pound on the global market. The British currency is strongly depreciated among the G10 currencies and may have the greatest growth potential from the main currencies, although this is strongly dependent on the recovery pace of the economies to the pre-pandemic state.

28 Apr 2020 11:57|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:

27 Apr 2020 17:36

Calm day before a week full of volatility (Afternoon analysis 27.04.2020)

27 Apr 2020 13:06

Positive sentiment still present (Daily analysis 27.04.2020)

24 Apr 2020 17:34

Calm Friday before an important week (Afternoon analysis 24.04.2020)

24 Apr 2020 13:39

Catastrophic business climate in Germany (Daily analysis 24.04.2020)

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