Set of positive data from China and Germany (Daily analysis 15.09.2020)

Tuesday started with a positive sentiment on the broader market. Early in the morning, macroeconomic data from the Chinese economy came in, indicating slightly higher activity in August than expected. The dollar was weaker again: the USD/PLN pair reached the lowest level since September 3rd, but changes in the zloty were small.

Drop in risk aversion weakens the dollar

Retail sales increased for the first time during the pandemic, recording an annual increase of 0.5%, suggesting increased consumption. Growth in industrial production was also higher than expected (0.4% vs expectations of +0.2%), and positive, exceeding market expectations, were also readings of investments in fixed assets and real estate.

While data from China should not be directly extrapolated to other regions of the world, they may give positive hints about activity growth and demand developments during the recovery of economies after the closure period. Even before midday, the data from the ZEW Institute, which measures the sentiment of economists in relation to Europe's largest economy, Germany, proved to be a confirmation of these trends.

Like the macro data from China, the ZEW index exceeded the market consensus in September, rising from 71.5 to 77.4 pts, although it was expected to fall to 69.5 pts. Both the assessment of the current economic situation and expectations for the future increased strongly, although optimism about the future grew slightly stronger.

In his commentary on the report, the President of ZEW, Professor Achim Wambach, wrote: "the ZEW Indicator of Economic Sentiment has increased again, signalling that the experts continue to expect a noticeable recovery of the German economy. Stalled Brexit talks and rising COVID-19 cases could not dampen the positive mood". The banking sector, which could be affected by unpaid loans in the next six months, remains an issue.

As a result, both Chinese data and the aforementioned ZEW index increased the risk appetite. Such circumstances are usually not favourable for the dollar, and it was no different today. The quotations of the main currency pair, i.e. EUR/USD, increased again slightly above the 1.19 boundary - although these were not significant changes in relation to yesterday's closing (about 0.2% around midday), and the trend of weakening of the dollar continues.

With these generally favourable conditions for the currencies of emerging countries, it cannot be said that the zloty is appreciating. Although the USD/PLN exchange rate fell to about 3.73, the lowest level since September 3rd, it was quite a limited change and caused by the global weakness of the dollar. The EUR/PLN exchange rate, on the other hand, remains almost unchanged, fluctuating between about 4.44 and 4.45. In the afternoon, US industrial production data will be published, which may introduce a little more volatility, but the potential for significant changes before tomorrow's statement, new economic projections and the Federal Reserve press conference is relatively small.