Strong growth in sales in the USA (Afternoon analysis 16.06.2020)

The optimism on the market related to fiscal and monetary stimulation received support: data on retail sales in the USA in May were higher than expected. The dollar appreciates in the afternoon, negatively affecting the zloty basket.

Strong increases, but they are not what they were a year ago

Retail sales in the US rose by 17.7% on a monthly basis in May, as compared to an expected 8.4% and a 14.7% decline in April. This strengthened the already positive market sentiment, adding to yesterday's reports of a considered increase in infrastructure spending of nearly 1 trillion USD in the US.

The May readings on retail sales in the USA underline how strong consumer demand was suppressed. Nevertheless, compared to last May, this demand is still at very low levels. Retail sales were by 6.1% lower than a year ago.

The readings about industrial production in the USA were much less positive. The Federal Reserve data showed a monthly increase of 1.4% in May, below the expected 3.0%, but this was a fairly significant improvement on the 12.5% decline in April.

The market received the data positively. The main market indexes in both the USA and Europe were again gaining strongly (about 2-3%). The dollar was also appreciating, supported by an increase in the yield of Treasury bonds. The EUR/USD exchange rate returned to levels observed 24 hours ago, and the EUR/USD pair fell from about 1.1350 to 1.1230.

The Polish MPC did not surprise this time

The afternoon strengthening of the dollar underlines the weakness of the zloty observed since the morning. In the afternoon, the zloty was the weakest currency among emerging countries in relation to, among others, the dollar, the euro or the franc. However, if we look at the recent days' quotations, its value against the main currencies moves in a relatively narrow fluctuation range.

In the afternoon, the EUR/PLN exchange rate went back over 4.45 PLN and the USD/PLN pair 3.96, but there are no fundamental changes. Slightly more volatility in the market could have been introduced by the statements of the Chair of the Federal Reserve before the Senate Banking Commission in the USA and by the Monetary Policy Council statement. In both cases, these were events in line with expectations. This time the Polish MPC did not change interest rates. Therefore, major changes by the end of the day should not be expected.