Limited changes in zloty's quotations (Daily analysis 12.05.2020)

There are still very limited changes in the zloty's quotations against the main currencies, which is also supported by good sentiment in the broader market and a slightly weaker dollar.

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 Consumer Inflation (CPI) in April (estimates: 1.7% y/y excluding energy and food).

Market awaits more data

Tuesday's morning trade did not bring significant changes in the broader market. This was also backed up by a practically empty calendar of significant macroeconomic events (data from the USA will be published in the afternoon). However, the sentiment remained, as it did last night, positive. The main market indexes in Europe were gaining. The spread between yields on Treasury bonds (those with longer maturities are gaining relatively faster) also fosters positive sentiment.

Due to an increased appetite for risk, the dollar depreciated, although the changes were not significant (about 0.2% in relation to the euro around midday). The EUR/USD quotations increased to about 1.0840, but they continued to move within a very limited fluctuation range from previous days. The market is now looking for reference points as to how the recovery in the economies will proceed due to the lifting of the restrictions. Until then, no significant changes in the broader market are expected.

The positive sentiment may also be related to the fact that the Federal Reserve, starting from today, is buying ETFs, i.e. bonds issued by companies - both investment and those with a higher rate of return. This may support positive sentiment in the short term, which in turn stabilizes the zloty.

The market (especially the equity market) is currently largely ignoring the disastrous macroeconomic data coming from the economies, which show that the recovery will start from the lower level and is likely to last longer than recently expected. This creates a risk of a significant deterioration in sentiment in the weeks and months to come (negative for the zloty in the short term) if the data from the period of lifting the restrictions disappoint market expectations.

The Polish currency moves within a limited range. If we exclude unexpected negative short-term shocks, only the data showing the recovery path for May-June will be able to increase the volatility range slightly. The EUR/PLN exchange rate continues to move around 4.55-4.56, while the USD/PLN exchange rate oscillates around 4.20. In the afternoon, the US consumer inflation data for April will be available - although they may slightly increase the market volatility range (especially in the case of the dollar), they should ultimately have a limited impact on quotations.