Industrial production in the USA as a positive surprise (Afternoon analysis 15.07.2020)

On Wednesday afternoon, optimism took over the financial markets. The increased appetite for risk, caused, among other things, by media reports of encouraging results of coronavirus vaccine tests, was manifested by strong increases on European markets.

The zloty loses part of the increases earned earlier

The main market indexes in Europe gained even over 2%, reaching their highest levels since the end of February. The euro continued to appreciate, but after exceeding 1.1450, the EUR/USD exchange rate slowed down. The quotations of the main currency pair went back to around 1.1420.

This reduced the demand for the zloty, which, remained strong in relation to the main currencies, but to a slightly lesser extent than in the first phase of the day. However, there were slight differences: the USD/PLN exchange rate was traded at about 3.92 an hour and a half after the session started on the New York Stock Exchange, while a few hours earlier it was slightly below 3.91. The EUR/PLN exchange rate moved from about 4.465 to 4.475, so there were also slight changes.

Strong June for the United States

A quarter of an hour before the session in the US, the Federal Reserve published June's industrial production data. It increased by 5.4% compared to May, 1.1 percentage points above the market consensus. The main component, i.e. manufacturing, which grew by 7.2%, surprised positively as well, as it was expected to increase by 5.7%. Capacity utilisation also showed a more positive trend than expected, increasing to 68.6%, 0.8% above consensus, and the data for May has been revised upwards by 0.3%.

Data from the manufacturing sector fits well with general market optimism, although their impact may be marginal at the moment. Over the past few days and in late June and early July, we have seen restrictions being imposed again in the US and successive phases of opening economies in individual states being held back. This will most likely affect the recovery path in the USA, therefore the data for June, although they showed a positive trend, may already be distorted for the market.

The news from China and the ECB will trigger reactions

The calendar of events scheduled for the rest of the day is empty, so no significant fluctuations are expected. Tomorrow, however, even before the European trading session starts, we will learn a set of macroeconomic data from China, including GDP for the Q2. These data may already have a slightly stronger impact on the market, so we can expect an increase in fluctuations. This also may happen a few hours later, at the time of the statement and press conference of the representatives of the European Central Bank, but significant changes in monetary policy are unlikely to occur.

At the weekend, the market's attention will be captured by events linked to the Eurogroup meeting on the European Union aid package. It is worth 750 billion EUR.