German companies optimistic about the future (Daily analysis 24.06.2020)

24 Jun 2020 14:31|Bartosz Grejner

The ifo business climate index for German companies rose above expectations in June. One of its components came out astonishingly high, rising almost to pre-pandemic levels. The zloty remains stable and within a limited fluctuation range.

The EUR/USD still close to 1.13

On Wednesday, the sentiment in the broader market slightly deteriorated. This is due to reports from the southern states of the USA about the rapidly increasing number of coronavirus cases. The discussion about the possible return of some of the restrictions has also intensified. This is why Wednesday's session was conducted with an increased aversion to risk until midday.

The main European market indexes lost around 2% and the gold has reached its highest level since 2012 (already nearly 1.8 thousand USD per ounce), but the dollar quotations did not change significantly. The EUR/USD exchange rate fell to about 1.1270 in the morning, which is only 0.2% below the level from yesterday's closing. Closer to midday, the euro/dollar exchange rate returned slightly above the 1.13 boundary.

It's bad, but it will be better (maybe)

This is partly due to the fact that the market is still sceptical about the idea of re-imposing restrictions (which would have huge economic consequences), and partly to the relatively good data from the eurozone. The business climate index for German entrepreneurs prepared by the ifo institute in June rose once again in a row and the reading of 86.2 points exceeded the consensus of economists by 1.2 points.

If we look at its components, the assessment of the current situation, although it also improved, was not significantly better than in May, and on top of that it turned out to be below expectations (81.3 vs. the expected 84 points). Apart from the current situation, which is clearly still far from optimal, German companies are very optimistic about the future. Business expectations for the future have risen practically to pre-pandemic levels (91.4 pts. in June vs. 93.1pts. in February), clearly exceeding the consensus (by 4.4 pts.).

Relative calmness in the EUR/USD quotations is also manifested by the limited fluctuation range for the basket of the zloty. A slight weakening of the dollar in the previous days (shift of the EUR/USD quotations from about 1.12 to 1.13) helped the USD/PLN exchange rate to fall to the lower limit from the last week, but this is basically the same as the changes in the zloty basket.

The quotations of the main currencies, such as the dollar, the euro or the franc, in relation to the zloty remain within a very limited range of fluctuations. Although there is a lot going on in economies (lifting restrictions, coming out of inactivity, increase in the number of diseases), the relative calmness in the market indicates that its participants are waiting for more data on the opening of economies and all the consequences (potential increase in the number of diseases) that the data will bring. Until then, fundamental changes are unlikely to be expected, and this also means that the zloty will remain within a limited range of fluctuations.


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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 the written permission from Cinkciarz.pl Sp. z o.o is prohibited.

See also:

23 Jun 2020 17:50

Data from the USA are not as surprising as those from Europe (Afternoon analysis 23.06.2020)

23 Jun 2020 14:16

Surprising data from the eurozone weaken the dollar (Daily analysis 23.06.2020)

22 Jun 2020 16:46

The dollar is weaker, but the fluctuation range is limited (Daily analysis 22.06.2020)

19 Jun 2020 17:42

Dollar tries to pare losses (Afternoon analysis 19.06.2020)

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