The beginning of Monday's session was held in a weaker sentiment. However, as the hours passed, it improved, and the dollar weakened. The zloty remains one of the stronger currencies of emerging countries in the afternoon.
Optimism weakens the dollar
Greater activity of US investors contributed to the improvement of sentiment on the broader market in the afternoon. Some of Europe's main market indexes recovered from nearly 2% losses just before closing, while demand for the dollar weakened with a better sentiment.
In the morning, the main currency pair, i.e. EUR/USD, was quoted at around 1.1226, while about an hour and a half after the start of trading on the New York Stock Exchange, it increased back to nearly 1.13.
These are obviously not significant changes. The dollar continues to move within a limited range of fluctuations. However, they highlight the uncertainty of the recovery path. This morning's macro data from China, which is a few weeks ahead of other countries in terms of the path to recover from the pandemic, suggest that this will not be a sharp increase in activity.
The coming months will provide clarity
The data for the next two or three months will reveal more. The optimistic sentiment, which has lasted for several weeks, may then be verified if the activity growth rate fails to meet expectations. This would be a positive scenario for the dollar, which would most likely benefit from an increase in risk aversion.
Until then, the market is likely to move in a limited fluctuation range, slightly curved towards a more optimistic sentiment.
Such conditions may be conducive to stabilising the zloty around current levels. Today, the zloty was very close to Friday's closing levels in relation to the main currencies. However, the afternoon's improvement in sentiment and a slight weakening of the dollar have strengthened the Polish currency.
The USD/PLN exchange rate gradually moved downwards, falling slightly below 4.93 in the afternoon, while the EUR/PLN exchange rate remained between about 4.43-4.44. Today, the zloty remained one of the strongest currencies of emerging countries, which should support stability in the following hours. Tomorrow afternoon, on the other hand, we can observe an increase in volatility, especially in connection to the dollar, as this is when the Chair of the Federal Reserve will start to address the US Congress.