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Positive sentiment supports the zloty (Daily analysis 19.05.2020)

19 May 2020 13:43|Bartosz Grejner

Increased appetite for more risky assets weakens the dollar. The agreement between the leaders of Germany and France on grants worth 500 billion EUR for EU countries strengthens the euro: the EUR/CHF exchange rate has been at its highest level since early March. The zloty is supported by a global shift in sentiment.

What will the Chinese do when they discover the vaccine

The trade between yesterday afternoon and today in the early hours of the morning was marked by very positive sentiment. The already relatively high level of optimism about loosening the restrictions in the economies has been supported by information from one of the pharmaceutical companies (Moderna) about promising initial tests of their coronavirus vaccine.

The sentiment on the broader market could also be boosted by the words of Chinese President Xi Jinping, who announced that if China develops the vaccine, it will be globally available. This comment could also have been made against the US, which is striving for prioritised access to the vaccine by some pharmaceutical companies, but the declaration fits well with the prevailing sentiment. So did the agreement between the German Chancellor and the French President to create a 500 billion EUR aid package in the form of grants for the most affected EU countries.

US currency under pressure

The increase in risk appetite combined with the somewhat unexpected agreement between Chancellor Angela Merkel and President Emmanuel Macron weakened the dollar while strengthening the euro on the global market. The EUR/USD exchange rate breached a very narrow volatility range, rising to around 1.0956 today, the highest level since the first week of May. The aforementioned optimism can also be seen in the EUR/CHF exchange rate: the EUR/CHF quotations reached about 1.0660 yesterday, which was the highest level since the first week of March.

This slightly greater (compared to previous days) change in sentiment, which led not only to the dollar depreciation but also contributed to the strengthening of the zloty basket. The USD/PLN exchange rate fell to around 4.1535 (the lowest since the beginning of May) around midday. The supply pressure on the franc also caused the CHF/PLN to drop to approx. 4.2770, i.e. the lower quotation boundary since the end of March, and GBP/PLN to approx. 5.0850, the lowest level since the last day of March. Relatively small changes were recorded in the EUR/PLN pair, because the positive impact of the relatively stronger zloty was, to a large extent, mitigated by the globally appreciating euro.

In the longer term, if the recovery is to proceed smoothly, the EUR/PLN exchange rate should gradually move downwards as demand for emerging countries' currencies increases.

April - a month free of new cars

Today, more data came that shed some light on how serious impact on the economies has the pandemic. According to the ACEA report, the registration of new passenger cars in the EU (excluding the UK) fell in April by 76.3% compared to April last year. A year ago, more than 1.14 million newly registered cars were recorded in April, while this year only slightly more than 270 thousand. It was also no big surprise that some of the countries most affected by the virus also recorded the biggest drops in new registrations: 96.5% and 97.6% in Spain and Italy respectively. Although a relatively strong increase in activity is expected in the first months after the start of the easing of restrictions, the data may suggest that the recovery path to the pre-pandemic level may not be easy (and uneven).

19 May 2020 13:43|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.

See also:

18 May 2020 16:27

Dominance of positive sentiment (Daily analysis 18.05.2020)

15 May 2020 17:48

Disastrous sales data from the USA (Afternoon analysis 15.05.2020)

15 May 2020 14:12

Germany in recession, Poland surprises (Daily analysis 15.05.2020)

14 May 2020 17:58

Tension between the US and China intensifies (Afternoon analysis 14.05.2020)

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