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Limited changes on the currency market (Daily analysis 10.02.2020)

10 Feb 2020 14:02|Bartosz Grejner

The empty macroeconomic calendar and sentiment from Friday that continues on the market support the stabilisation of the foreign exchange market. The EUR/USD is still below 1.1000. The zloty is in a limited volatility range: the EUR/PLN pair is slightly above 4.26. Low volatility on the broader market should support the stabilisation of the zloty basket until the end of the day.

Dollar without appreciation but it still remains strong

This week began relatively quietly on the foreign exchange market. Until midday, the changes were limited, which was supported by both an empty calendar of macroeconomic events and the continued positive sentiment. Therefore, the dollar is still globally stronger. The dollar's appreciation is supported by macroeconomic data, which were received last week, among others.

The data illustrate the growing disproportion between the USA and eurozone economies, in favour of the former. The existing uncertainty in the broader market about the virus is also an argument for maintaining the condition of the US currency. The stronger dollar also has a disinflationary effect on the global economy, which negatively affects the valuation of emerging country currencies (EM).

Bloomberg's index of the dollar, which also includes EM currencies, has remained at the upper quotation limit since early December: just above 1206 points around midday. The main currency pair, i.e. the euro/dollar, did not fluctuate significantly either, and it is still below 1.000, around 1.0950, just at its lowest level since October.

Current conditions do not support zloty's appreciation

No further appreciation of the dollar does not exert additional pressure on the zloty, but its relatively good condition will prevent the zloty from increasing strongly. In the afternoon, the EUR/PLN exchange rate was close to 4.26, slightly (around 0.2%) below Friday's closing. The fluctuation range of approx. 4.2620-4.2750 did not differ from that of Friday. The situation was similar in the case of the zloty's relation to other main currencies.

Empty calendar of macroeconomic events later in the day should support the zloty's stabilisation around current levels. A little more fluctuations in the main currencies, as well as the zloty, may be introduced tomorrow by Jerome Powell, head of the Federal Reserve. Powell will give the US Congress a mid-year monetary policy report. We can expect questions about the impact of the virus on the US (and global) economy. It is unlikely to be expected that Powell will make a clear statement about the level of interest rates later in the year, but the volatility may increase significantly during his speech and Q&A.

10 Feb 2020 14:02|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.

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