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Sentiment improved (Afternoon analysis 26.02.2020)

26 Feb 2020 17:09|Bartosz Grejner

Slightly better data from the USA and the rebound in the equity market somewhat improve global sentiment. The zloty pares some of the losses. For the late evening, President Donald Trump planned a press conference on coronavirus. At this time of the event, there may be greater volatility in the market.

In the afternoon, there were signs of a slight recovery of sharp declines in the markets in recent days. The main market indexes in the USA grew over 1% a moment after the start of trading, and their European counterparts reversed most of the losses (or in some cases even gained). Combined with the lack of dollar appreciation and slightly better-than-expected macro data from the US, the sentiment in the afternoon was undoubtedly better than yesterday or even this morning.

The US real estate market does not fail

Today, the Census Bureau announced that sales of new homes in the USA increased by 7.9% month-on-month in February (764 k). This is the fastest growth pace that has been recorded since the middle of last year and much above expectations at 3.5% (718k). Today's reading matches the positive image of the US real estate market, which may support market sentiment.

The afternoon's improvement in sentiment has also had a positive effect on the zloty basket. The Polish currency pared some of the losses incurred in the first part of the day. The EUR/PLN exchange rate fell from about 4.3150 to 4.3050 an hour after the start of trading on the New York Stock Exchange. A minimally stronger dollar following an improvement in sentiment and US data caused the USD/PLN exchange rate to stabilise slightly above 3.96, although fluctuations may still increase this evening.

For midnight (6:00 p.m. Washington time), President Donald Trump has scheduled a press conference on coronavirus. Apart from the President of the USA, representatives of the CDC, an institution responsible in the USA for preventing the spread of diseases, among other things, will also be addressing. The potentially negative tone of this conference could increase the level of risk aversion and weaken the zloty basket again.

Tomorrow's preview

At 2:30 p.m., the Bureau of Economic Analysis (BEA) will publish the second reading of US GDP growth pace in the Q4. The median of market expectations assumes 2.1% of anualized quarter-on-quarter growth, similar to the initial publication. Another revision of US GDP relatively often deviates from the initial data, so we can expect an increase in dollar fluctuations in case of deviation from the consensus.

At the same time, other data from the US economy will be published, i.e. orders for durable goods in January (consensus: -1.5% month-on-month) and the number of submitted initial jobless claims (212k). The dollar is currently somewhat weakened by increased market expectations for interest rate cuts this year. Slightly better than expected data from the US economy may support the US currency, potentially weakening the zloty somewhat.

26 Feb 2020 17:09|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:

26 Feb 2020 14:39

Drop in the bond yields weakens the dollar (Daily analysis 26.02.2020)

25 Feb 2020 17:17

Sentiment deteriorates (Afternoon analysis 25.02.2020)

25 Feb 2020 14:02

Stabilisation, but the sentiment will change quickly (Daily analysis 25.02.2020)

24 Feb 2020 13:01

Strong growth in risk aversion, the zloty loses (daily analysis 24.02.2020)

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