Positive reports on trade (daily analysis 19.06.2020)

Information on the planned acceleration of imports of agricultural goods from the USA by China supports the continuation of positive sentiment in the market. The dollar is recording limited changes, but its gradual strengthening may affect the zloty.

The dollar pares losses

Friday started with positive reports on the US-China trade agreement. Bloomberg reported, citing anonymous sources, that after talks in Hawaii between the USA and Chinese representatives, the Asian superpower plans to speed up the purchase of agricultural products, in line with the signed first phase of the trade agreement.

The pandemic caused China to fail to comply with the agreement to import goods from the USA, but now China was to declare the purchase of soya, corn and ethanol, among others. Such information supports positive sentiment today, maintaining increased demand for more risky asset classes.

At around midday, the dollar remains at the level of yesterday's closing. The US currency is still relatively weak in the context of the last month, but for about a week and a half, the dollar has been gradually recovering. Yesterday afternoon, the EUR/USD exchange rate fell below 1.12 for the first time in two weeks.

That will not help the zloty

If the dollar continues its appreciation path, it may increase the supply pressure on emerging countries' currencies, including the zloty. The Polish currency was quite strong on Friday morning, even compared to other emerging country currencies, with only limited changes. The USD/PLN exchange rate still remains below the 4.00 boundary (around 3.98 at midday), and the EUR/PLN is in the range of approx. 4.44-4.46, more or less the same was observed in the previous few days.

The zloty might also have been supported by data from the Polish economy. According to the Polish Central Statistical Office (GUS), industrial production in May increased by 10.1% on a monthly basis, which is 1.2 percentage points above expectations. Nevertheless, the overall state of the industry remains disastrous, production was 17% lower than in May last year, although here too the reading was slightly higher than expected - the consensus showed a decline of 18%.

Ultimately, however, the Polish currency will follow the trend prevailing in the broader market, and domestic data will have limited impact. The dollar is currently fluctuating at 1.12 for the EUR/USD, and the boundary of 1.24 for the GBP/USD pair has also been exceeded (the lowest since June 1st) and the continuation of this trend may weaken the zloty in relation to the main currencies.