Positive start (Daily analysis 28.09.2020)

Positive sentiment on the broader market holds back the dollar's appreciation. The pound is clearly rising while awaiting the positive effect of talks between the UK and the European Union starting tomorrow. The GBP/PLN exchange rate exceeds 5.03 PLN and has been rising to its highest level since May.

The dollar stops for a moment

The trade on Monday morning on the broader market is in a fairly positive mood. This is mainly due to the lack of market-relevant events during the weekend and today, and partly to the fact that the European markets are catching up with the strong growth that was achieved on Wall Street on Friday afternoon.

With a good sentiment, it is difficult for the dollar to continue its appreciation, which is fostered by a slightly greater aversion to risk. As a result, the US currency recorded only limited changes until midday. The EUR/USD pair fluctuated between about 1.162 and 1.165. This is just at the lower end of the last two months, but the EUR/USD rate did not manage to fall below 1.16, and this could open the way for further declines.

An expected increase in fluctuations

The peaceful beginning of the week, however, does not announce that the rest of the week will be like this. On Tuesday evening, Donald Trump and Joe Biden will have a pre-election debate. It will probably not bring significant changes in the valuation of the main currencies, but it may increase fluctuations compared to what we are currently observing.

The second part of the week will be no less important. On Thursday, the ISM institute will publish the index of activity in the US industrial sector, and on Friday we will discover the most influential publication of this week, i.e. the US labour market report for September. At the end of the week, we can observe a strong increase in dollar fluctuations.

If the demand for the US currency increases, in particular, the EUR/USD exchange rate drops below 1.16, we can expect further supply pressure on the zloty.

In the group of emerging country currencies, the zloty was one of the biggest beneficiaries of the weakening of the dollar in previous months. Last week, in turn, the zloty was among those currencies that lost most after the US currency's appreciation.

Brexit again significantly increases pound fluctuations

After climbing to its highest level since May last week, the EUR/PLN exchange rate remains at this level until midday, ranging from approx. 4.55-4.56. The USD/PLN exchange rate fluctuates around 3.91. The GBP/PLN exchange rate moves the most, rising just above 5.03 today, to its highest level since May. This is due to the better condition of the British currency in the morning.

On Tuesday, another round of talks between the United Kingdom and the European Union on a new trade agreement begins. Today's strengthening of the pound is the result of the cautious optimism expressed by the heads of negotiators on both sides. The pound/dollar exchange rate (GBP/USD) rose around 1% at midday, just below the 1.29 level.

Today, the increase in the value of the British currency helps to stop the appreciation of the dollar, but later in the week, we can still observe significant changes in the value of both currencies, which will also be reflected in the GBP/PLN quotations. The zloty is currently not in the best condition, which may limit the potential scale of the GBP/PLN exchange rate decrease, but on the other hand, a dose of negative information from the negotiating front (the UK with the EU) may weaken the pound globally again.