Slight change but the dollar is still weak (Daily analysis 28.07.2020)

Tuesday's trading was marked by a slight rebound, after yesterday's strong depreciation of the US currency, which affected the broader market, including moving the price of gold to nearly 2 000 USD per ounce and strengthening the currencies of emerging countries.

Today, the EUR/USD quotations moved a little bit away from yesterday's highs, falling to about 1.1720 in the afternoon. However, it is still only a few tenths of a percent below the nearly two-year highs of the main currency pair. However, if we look at the relationship of the dollar to the Swiss franc or the yen - in both cases, it continues to fall which reinforces the argument that the weakness of the US currency will not disappear quickly.

The emerging countries' currencies (EM) lost somewhat today, reacting to yesterday's increases in value. Yesterday, the zloty was one of the strongest currencies among the EMs, while today it was one of the weakest. However, these were not significant changes if we take into account recent weeks. The zloty is still relatively strong and one of the winners of the comparatively positive effects of coping with the coronavirus pandemic in Europe.

The EUR/PLN exchange rate stabilises around 4.40, while the USD/PLN exchange rate, after a temporary drop below 3.73, returns over the 3.75 level in the afternoon. The aforementioned good condition of the Swiss franc in relation to the dollar also has an impact on a relatively stronger increase in the CHF/PLN exchange rate by nearly 1% to slightly over 4.09 - although despite this increase, the entire drop from yesterday was not even reversed.

The second day of the week was generally a day of calm quotations. The changes in the market were largely driven by the recovery, and it was also a transition day. Tomorrow, we will receive statements and press conference of the Federal Reserve, and the next day we will see the GDP data for the Q2 from the USA and the eurozone. These are the events the market prepares for; therefore, these are the events that will slightly increase market volatility.

GDP data may show the disparities between the US and Europe, although fundamental changes are not expected here. The readings are for the Q2, and these negative developments in the US, which are also currently weakening the dollar, such as the renewed closure of some states, took place in the last days of Q2 and at the beginning of this year. Similarly, in the context of the euro, agreement in Brussels has already been signed in this quarter. From this point of view, the market may already perceive these data as historical and may have little fundamental impact as a result. The zloty in this context should maintain most of the profits generated in recent days.