Increase risk aversion during trade on Wednesday: the dollar and franc appreciate, and the zloty and the Chilean peso are the weakest currencies of emerging countries.
The EUR/USD is closer and closer to falling below 1.12
Wednesday started with the continuation of positive sentiment from previous days. Optimism was also reinforced by the data published yesterday from the USA for May. Retail sales increased by just over 17% m/m, nearly double the expectations. The data indicating increased consumption also fitted well with the surprisingly positive report from the US labour market, also for May.
However, as the hours passed, the optimism gradually faded away. Although the equity market still maintains most of the profits generated in the previous days, we have not seen any growth of several percent. During the Wednesday afternoon, the aversion to risk increased slightly, which manifested itself in increased demand for the dollar and the Swiss franc.
Cautious market
Information on coronavirus infections most likely causes the deterioration of sentiment. As a result of their increase, yesterday afternoon, there was information that Beijing has again increased the level of restrictions (it is planning to close schools and restrict air connections). This afternoon, Texas authorities reported that COVID-19 hospitalizations increased by 11% over the last 24 hours.
This negative flow of information contributes to the fact that market participants may seek slightly safer places to allocate capital. The main currency pair, i.e. the EUR/USD, fell to about 1.1208 today. And although this still means a weak dollar in the context of the last month, it is already the lower boundary of the quotations seen in the previous two weeks.
The appreciation of, among others, the dollar and the franc has, in turn, contributed to increased supply pressure on emerging country currencies (EM). Once again, the zloty stood out in this context: alongside the Chilean peso, the Polish currency was the weakest of the EM currencies against the dollar, the euro or the franc in the afternoon. The USD/PLN exchange rate reached about 3.9860 PLN in the afternoon, the highest level since June 1st. There are no fundamental changes in the market at the moment, but if the dollar starts to gradually strengthen (and the EUR/USD is heading towards ca. 1.10), the internal weakness of the zloty due to an unexpected cut in interest rates by the NBP may weaken the entire zloty basket.
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.
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16 Jun 2020 17:44
Strong growth in sales in the USA (Afternoon analysis 16.06.2020)
Increase risk aversion during trade on Wednesday: the dollar and franc appreciate, and the zloty and the Chilean peso are the weakest currencies of emerging countries.
The EUR/USD is closer and closer to falling below 1.12
Wednesday started with the continuation of positive sentiment from previous days. Optimism was also reinforced by the data published yesterday from the USA for May. Retail sales increased by just over 17% m/m, nearly double the expectations. The data indicating increased consumption also fitted well with the surprisingly positive report from the US labour market, also for May.
However, as the hours passed, the optimism gradually faded away. Although the equity market still maintains most of the profits generated in the previous days, we have not seen any growth of several percent. During the Wednesday afternoon, the aversion to risk increased slightly, which manifested itself in increased demand for the dollar and the Swiss franc.
Cautious market
Information on coronavirus infections most likely causes the deterioration of sentiment. As a result of their increase, yesterday afternoon, there was information that Beijing has again increased the level of restrictions (it is planning to close schools and restrict air connections). This afternoon, Texas authorities reported that COVID-19 hospitalizations increased by 11% over the last 24 hours.
This negative flow of information contributes to the fact that market participants may seek slightly safer places to allocate capital. The main currency pair, i.e. the EUR/USD, fell to about 1.1208 today. And although this still means a weak dollar in the context of the last month, it is already the lower boundary of the quotations seen in the previous two weeks.
The appreciation of, among others, the dollar and the franc has, in turn, contributed to increased supply pressure on emerging country currencies (EM). Once again, the zloty stood out in this context: alongside the Chilean peso, the Polish currency was the weakest of the EM currencies against the dollar, the euro or the franc in the afternoon. The USD/PLN exchange rate reached about 3.9860 PLN in the afternoon, the highest level since June 1st. There are no fundamental changes in the market at the moment, but if the dollar starts to gradually strengthen (and the EUR/USD is heading towards ca. 1.10), the internal weakness of the zloty due to an unexpected cut in interest rates by the NBP may weaken the entire zloty basket.
See also:
Strong growth in sales in the USA (Afternoon analysis 16.06.2020)
Plans for spending in the US worth trillions of dollars (daily analysis 16.06.2020)
Improved sentiment and drops in the dollar's quotations (Afternoon analysis 15.06.2020)
Stable zloty (Daily analysis 15.06.2020)
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