The Americans earned more and spent more (Afternoon analysis 28.08.2020)

The data on private spending of Americans may suggest that the positive trend in consumption will continue, even during the period of the return of restrictions in some states. The dollar is under pressure again today, and the zloty benefits from its weakness. The USD/PLN exchange rate is getting closer to its lowest level in two years.

Another set of positive data from the USA

On Friday afternoon, another set of macroeconomic data from the USA came in, which exceeded market expectations. According to the Bureau of Economic Analysis (BEA), US spending rose by 1.9% on a monthly basis in July, 0.3 percentage points above the expected reading. The June data were also revised upwards from 5.6% to 6.2%.

This is quite an important signal that consumer demand has not encountered problems on a national scale, despite the repeated imposition of restrictions in some states. BEA spending data are a better measure of consumer demand than sales data, as they also include services. Americans' income rose by 0.4% in July, even though it was expected to fall by 0.3% on a monthly basis.

The positive impact of this data was supported by the second reading of the University of Michigan's consumer sentiment index. In August, the index rose to 74.1 points, slightly above the preliminary reading of 72.8 points. Both current and future expectations increased in relation to the first estimate, but it was the latter that ultimately contributed more to the slightly higher overall sentiment of US consumers.

Published today's data are in line with the majority of positive readings from the US, which, however, has no significant impact on the dollar. The US currency has been under supply pressure since the early hours of the morning, and this is primarily due to yesterday's speech by Jerome Powell, chair of the Federal Reserve.

The dollar index the lowest since May 2018

The EUR/USD quotations rose by slightly more than 0.5% this afternoon, oscillating around 1.19. While no new highs were reached in the case of the EUR/USD, Bloomberg's index of the dollar (which includes the currencies of emerging countries, unlike, for example, the DXY index) fell today to its lowest level since mid-May 2018 (about 1160 points), highlighting the weakening of the dollar in the broader market.

On Friday, the zloty remains one of the main beneficiaries of the dollar's weakness among emerging countries currencies. The zloty gained more than 1.2% against the dollar in the afternoon, and the USD/PLN exchange rate fell to about 3.684 PLN, approaching the lower volatility limit of the last two years (about 3.66). The EUR/PLN exchange rate, on the other hand, moved to around 4.385, the lower limit of the last week (the volatility here is lower than in the previous case).

The future fate of the zloty depends primarily on the behaviour of the dollar in the global market. An increase of the EUR/USD pair to around 1.20 could potentially improve the condition of the zloty. However, it should be taken into account that next week may bring even more volatility due to the publication of the US labour market report scheduled for Friday, as well as ISM activity indexes. Although the dollar is currently under the influence of changes in the monetary authorities' approach to inflation (low interest rates for a longer period of time), if macro data from the US economy continue to be largely positive (especially in the case of the labour market report), we can observe the strengthening of the dollar.