Positive sentiment and good condition of the euro (Afternoon analysis 13.07.2020)

Monday afternoon was characterised by further weakening of the dollar and strengthening of the euro. The EUR/USD exchange rate rose to around 1.1360 in half an hour from the opening of the New York Stock Exchange. This is the highest level since Thursday and right at the upper mark for a month.

Without significant macroeconomic publications planned for today, positive sentiment related to the opening of economies and the accompanying increase in activity prevailed. Market participants are awaiting important events related primarily to Europe.

How much will the EU offer to help?

On Thursday, the European Central Bank (ECB) will announce its decision on monetary policy. No major changes are expected. The message coming from the ECB may be important for the market. Part of the increase in optimism in recent days and the improvement in the euro's condition are also the result of the belief that Europe is coping with the pandemic well. This may translate positively into a recovery path, which, unlike in the USA, for example, does not encounter significant problems.

One of the key elements for this recovery path in Europe will be an aid package (in the form of grants and loans) for EU countries. Even if we do not know the decision on this matter at the weekend, it seems likely that a consensus on the programme's objectives will be reached, which is also positive for the market, as it slightly brightens the picture of the recovery of European economies in 2021.

Due to the aforementioned events, we can expect an increase in the volatility of both the broader market and the euro against the main currencies. Although as of tomorrow, we will also receive the June data on consumer inflation (CPI) in the USA, their impact on the currency market in the current, unusual period will be limited.

The euro close to the upper boundary

For the zloty, persisting positive sentiment combined with a weaker dollar results in a very limited fluctuation range. The USD/PLN exchange rate oscillated around 3.95 PLN in the afternoon, i.e. close to Friday's closing levels.

Nevertheless, further improvement in the euro's condition supports the continuation of the slow increase in the EUR/PLN exchange rate. On Monday afternoon, it reached about 4.4880 PLN, which is the upper limit of quotations since May 26th. As there are no events planned for the rest of the day that could change the sentiment on the market, the zloty's quotations should move around current levels.