Next inflow of positive data from Poland (Daily analysis 20.08.2020)

The dollar appreciates after yesterday's publication of minutes from the FOMC meeting. The zloty is one of the strongest currencies of emerging countries after the publication of data from Poland: industrial production increased for the second year in a row.

Fed gives an impulse

On Thursday around midday, a slightly stronger dollar is observed, compared to what has been seen in recent days. The EUR/USD quotations fell to around 1.181 today, which still indicates significant weakness of the dollar, but the exchange rate is at its lowest level since last Friday.

The dollar appreciation began yesterday evening, following the publication of a transcript of the last meeting of the Federal Reserve Monetary Committee (FOMC). The so-called minutes did not contain anything unexpected but were treated by the market as an incentive to react to, among other things, the recent strong weakening of the dollar or increases in the equity market.

FOMC members stressed that "the ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near term and was posing considerable risks to the economic outlook over the medium term". In their view, this crisis will severely affect economic activity, and the recovery path will depend on stopping the coronavirus.

The zloty just behind the South African rand

Despite the dollar in a slightly better condition and the weaker global sentiment, the Polish currency holds most of the profits generated in recent days. Today, the zloty was right behind the South African rand, being the strongest in the group of emerging country currencies, also supported by the publication of further positive data from the Polish economy.

According to the Polish Central Statistical Office (GUS), industrial production in Poland increased in July by 3.4% on a monthly basis, exceeding the expected 1.5%. The year-on-year production also came as a positive surprise, increasing by 1.1% and recording the second consecutive growth in the pandemic period (in June it was 0.5%). Although external factors mainly influence the zloty, a positive market attitude towards the European area and better than expected (in the vast majority) macro data from the Polish economy give the zloty a slightly larger impulse than other emerging currencies, in the event of, among others, a worsening of sentiment and/or the return of a stronger dollar.

Today, around midday, the USD/PLN exchange rate fluctuated around 3.71 and the EUR/PLN rate around 4.39. The zloty's condition will depend mainly on the behaviour of the dollar later in the day. If part of yesterday's appreciation of the dollar is reversed when US investors start to be more active, the zloty may even increase a little. On the other hand, if the dollar strengthening continues, the zloty is also in relatively better shape, and its potential losses should be limited.