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Slight rebound on the market but zloty with limited increases (Daily analysis 22.09.2020)

22 Sept 2020 13:50|Bartosz Grejner

After Monday's depreciation, the appetite for risk increases around midday, but for the time being very cautious. Demand pressure on the dollar decreased. New restrictions in the Islands and Bailey's comments strengthen the pound fluctuations. The zloty pares the losses, although to a small extent.

Dollar's appreciation stopped for now

Tuesday trade around midday was carried out in a slightly better mood than yesterday. After yesterday's losses of up to 4%, the main European market indexes were gaining about 1%. The dollar was still clearly appreciating in the morning - the EUR/USD quotations dropped to about 1.1720, setting new, over monthly lows. As the appetite for risk increased, the US currency also weakened and around midday the exchange rate of the main currency pair exceeded 1.1760.

This was still about 0.1% below yesterday's closing, but the reduction in demand pressure on the dollar also helped to catch the breath by emerging countries' currencies, which were heavily depreciated yesterday. The zloty, which was in slightly better condition around midday, was not one of the currencies paring the losses strongly.

The EUR/PLN quotations fell below 4.49 in the afternoon, which was marginally below yesterday's closing, although in the morning they reached about 4.5150, the highest level since the end of May. The CHF/PLN exchange rate exceeded 4.20 in the morning for the first time since mid-July, before dropping to about 4.17. Similarly, the USD/PLN, which after breaking through yesterday's highs and rising to 3.85, dropped to about 3.82.

The rest of the day may promise more volatility when market participants from across the pond become more active as well. In the afternoon, the chair of the Federal Reserve and the Secretary of the Treasury will also testify before the Committee on Financial Services in the U.S. House of Representatives, which may further increase the range of market volatility.

Negative interest rates not so soon

In turn, a little more stimulus was given to the pound today. The British government has again recommended working from home, if possible. New restrictions have also been imposed on pubs and restaurants (as of Thursday) due to the increased rate of coronavirus infection. In addition, the Governor of the Bank of England, Andrew Bailey, attended a video conference today with the British Chamber of Commerce, which provided some information on negative interest rates.

Bailey concluded that negative interest rates should be in the Bank of England toolset. Work on the technical issues of introducing negative interest rates according to him may take "some time". This may have reassured those market participants who feared that rates below zero might be introduced relatively soon (and earlier than expected).

As a result, the pound was in slightly better condition this afternoon. Although the GBP/USD quotations reached their lowest level in two months (about 1.2710) in the morning, after Bailey's comments and the reduction of the demand pressure on the dollar, they rose again above the 1.28 boundary (about 1.2870 at some point). The GBP/PLN exchange rate also moved from today's highs of about 4.92 to 4.90 - but this is still around the nearly two-week high, and if we add to this the uncertainty of Brexit, the pound is likely to be subject to significant fluctuations.

22 Sept 2020 13:50|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:

21 Sept 2020 18:19

Dollar appreciates and the zloty goes below in red again (Afternoon analysis 21.09.2020)

21 Sept 2020 14:34

Data from Poland fail to meet expectations (Daily analysis 21.09.2020)

18 Sept 2020 15:30

The zloty goes below in red in the afternoon (Afternoon analysis 18.09.2020)

18 Sept 2020 11:26

The Brexit issue looks slightly more optimistic (Daily analysis 18.09.2020)

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