The European Commission has updated its GDP growth projections. The EC expects a drop of 8.7% this year. This is 1 percentage point more than estimated in May. The sentiment on the market is slightly weaker; the dollar pares some losses. The zloty remains stable.
The dollar appreciates, but it is still weak
After yesterday's day of the high level of optimism, today we observed a slight rebound of this sentiment in the early afternoon. The main European market indexes were dropping about 1%, and the dollar was paring some of the losses incurred yesterday.
Today, the EUR/USD quotations fell again below the 1.13 boundary, to about 1.1260 (yesterday's high was about 1.1345). A slightly stronger dollar today was partly a result of a rebound, partly a negative stimulus in the form of updated European Commission projections for the eurozone.
Currently, the EC expects that the GDP of the common currency area has probably contracted by 13.5% in Q2, and for the whole year it expects a drop of 8.7%. This is more than in May's projections, which indicated a 7.7% decline in GDP. In the EC's evaluation, the imbalances between the economies are now also more visible, which may hamper the return of the EU economy as a whole to the pre-pandemic state.
The zloty insensitive to the sentiment observed today
Although today there is a slight deterioration in sentiment, there is little chance that the market will actually concern itself with EC projections. Focus is on the increase in economic activity due to the lifting of restrictions. Optimism is also still supported by both monetary and fiscal stimulation. Only data that could potentially indicate a much slower-than-expected recovery path could significantly change the market trend.
The worsening of sentiment compared to Monday and the strengthening of the dollar did not affect the zloty much. The EUR/PLN exchange rate fluctuated between approx. 4.46-4.47 PLN in the early afternoon and the USD/PLN exchange rate was around 3.96 PLN. Similar values are expected by the end of the day, as the calendar of significant macro events is practically empty.