Strong growth in industry (Daily analysis 10.07.2020)

Activity in the French and Italian industry increased above expectations in May, reinforcing the argument about the relatively good results of the fight against the pandemic in Europe.

The dollar slightly unstable but it maintained the level

From yesterday afternoon to this morning, we have observed a slight deterioration in market sentiment due to reports from the US on the pandemic. Florida, California and Texas have reported a record number of COVID-19 deaths, and the daily number of new cases in the US as a whole has exceeded 60,000.

As a result, risk aversion increased slightly, and demand for the dollar increased. The main currency pair, the EUR/USD, fell to around 1.1255 this morning, i.e. to the lower range since the beginning of the week, while yesterday's high was around 1.1370. In the morning, however, the sentiment was supported by positive macroeconomic data from Europe and the EUR/USD exchange rate rose to around 1.1290 in the morning, which is practically in line with yesterday's closing.

France and Italy surprise positively

This is a result of, among other things, higher than expected increases in activity in the industrial sector in France and Italy. Manufacturing grew by 19.6% in France, i.e. by 4.2% above expectations. In Italy, production increased by 42.1%, as much as 18.1 percentage points above the economic consensus.

The data may support the view that Europe copes better with the coronavirus than the US. This, in turn, to some extent, removes the concerns which investors may have about the development of the epidemic in the US.

The greater concern about the virus is reflected in increases in the value of gold, the Swiss franc or the yen. However, more fundamental changes in the broader market are likely to be the topic for the next months, when more data from the following months of economic recovery will flow into the market. They will make it possible to assess the pace of recovery and the disparities between the economies.

The zloty awaits further stimuli

For the zloty, this situation translates into stabilization in relation to the dollar. The USD/PLN quotations practically do not exceed a narrow range of fluctuations from the last about a month. A limited fluctuation range is also observed in the case of the EUR/PLN exchange rate, which fluctuates between 4.46 and 4.47 PLN. In this case, a slight upward trend has been observed in the last two weeks due to, among other things, the good situation of the euro on the global market and increased uncertainty about the pandemic occurring outside Europe.

Upward trends can also be seen in the CHF/PLN exchange rate. This is also due to fears of coronavirus and the global situation (outside Europe). Today, the CHF/PLN exchange rate fluctuated around 4.20-4.22, coinciding with that of recent days, but still at the upper limit from the end of May.

An increase in quotations is also observed in the case of the GBP/PLN pair, which is related to the announcement of an additional stimulus package for the British economy. The package turned out to be slightly larger than expected. At the back of investors' heads, the issue of negotiating a trade agreement with the EU has been hanging over the pound, which may adversely affect the British currency in the coming months, or at least limit its growth potential. As we approach the end of the year, fluctuations in the pound are expected to increase markedly.