The dollar is weaker, but the fluctuation range is limited (Daily analysis 22.06.2020)

The beginning of the week started with relatively calm quotations. The market continues to move within a limited fluctuation range, trying to assess the mix of positive data related to the opening of economies and growing cases of the disease, among others in the US states, which "opened" the fastest.

Sales grow strongly but remain weak

Gradually, more and more macro-economic data from the economies for the period of the easing of restrictions (May, June) are also beginning to flow. This will probably be the period of the strongest growths, at least on a one-month basis, from the lows observed in March and April (depending on the economy).

However, the pace of activity growth is likely to flatten in the coming months, which will also be influenced by the modification of consumer behaviour and the unknown impact of the next wave of coronavirus outbreaks along with the opening of economies.

A positive dose of information for May was provided by the Polish Central Statistical Office today. Retail sales in May increased by 14.5% on a monthly basis, above market expectations at 11.2%. The positive data supported the zloty, although it should be remembered that compared to May last year, sales were still significantly lower due to the pandemic (by 8.6%).

As a result of this positive stimulus, the zloty was the strongest-appreciating currency of the emerging countries against the dollar in the afternoon, and among the three strongest-gaining currencies (after the Brazilian real and the Mexican peso) against the euro and the franc Despite this positive condition of the zloty today, it still moves in a limited fluctuation range.

Monday’s quotations similar to those observed on Friday

Today, the main currency pair, i.e. the EUR/USD, despite the globally weaker dollar today, does not fall out of the fluctuation range observed in recent days, despite the fact that it is increasing by about 0.6% compared to Friday's closing. A similar story is also observed in the case of the zloty: although USD/PLN quotations fall by approx. 1%, the fluctuation range of about 3.95-4.00 is consistent with that of Friday (similarly to the EUR/PLN pair in about 4.44-4.47).

As the autumn period approaches and the associated threats to the current positive sentiment in the market (e.g. US elections, potential second wave of illnesses, trade negotiations in the UK), the supply pressure on the dollar may gradually ease. In turn, it may shift to more risky asset classes, including the zloty.

The present time is favourable for the Polish currency due to the opening of economies and additional liquidity in the financial market. However, when the growth pace of economic activity will gradually slow down, and potential risks will start to emerge on the horizon, the zloty, together with other EMs, may still lose slightly in relation to current levels (before it returns to its growth path).