The dollar is weaker before the evening events (Daily analysis 16.09.2020)

New OECD projections of global GDP show a lower decline than previously estimated. Yesterday's growth in demand for the US currency is fading. The zloty is stabilizing, but fluctuations will increase in the evening due to the Federal Reserve.

The EUR/USD pair again close to 1.13

On Wednesday, the market will focus on the Federal Reserve's evening events, when the statement after the Monetary Committee meeting and the new macroeconomic projections will be published. Until then (8:00 p.m.), no major changes among most asset classes are expected. However, the sentiment in the market around midday remained positive.

Yesterday afternoon, the World Trade Organization (WTO) announced in a statement that it was questioning some of the duties imposed by the US on imports from China. That strengthened the dollar a little during the day, and in the evening, the EUR/USD fell to about 1.183, from just over 1.19 during the day.

Today, in anticipation of the evening with the Fed, the dollar was weakening again. Around midday, the EUR/USD exchange rate rose close to yesterday's highs to around 1.1883. Today, the euro can be supported by the new global GDP projections for 2020 from the OECD. According to updated estimates, global GDP will contract by 4.5% this year, compared to a 6% drop previously forecast.

OECD supports moods, but focus is on the Fed

The OECD notes smaller GDP declines both in the eurozone and in the US. New forecasts from the OECD are still pessimistic - initial growth is expected to decline rapidly, and global GDP will not reach the levels of late 2019 in 2021, but they are slightly less pessimistic than before.

This can support global sentiment, and in turn, positive sentiment in the broader market is not usually favourable for the dollar. The main event today is still the Fed, but apart from the significant increase in volatility, fundamental changes for the dollar are not expected.

The zloty stabilizes in a climate of relatively positive sentiment on the broader market and lack of dollar's appreciation. The zloty's quotations to the main currencies move in limited ranges, mostly in line with those observed in the previous days, i.e. the EUR/PLN approx. 4.44-4.45, the USD/PLN approx. 3.74-3.75 and the CHF/PLN approx. 4.13-4.14. The GBP/PLN quotations increase slightly, to approx. 4.85 around midday.

However, it is important to remember that last week there were strong declines in it, so it is partly a matter of rebound, which is also possible if there is no inflow of negative information about Brexit, as last week. Tomorrow, too, the pound's quotations may be subject to a significant increase in volatility following the announcement made by the Bank of England after the Monetary Committee meeting. However, the issue of Brexit, namely the negotiation of a new trade agreement between the UK and the EU, will remain the main determinant of the pound's value in the coming weeks.