The dollar's appreciation on hold - for now (Afternoon analysis 25.06.2020)

One hour after the trading on the New York Stock Exchange began, sentiment on the broader market improved slightly, compared to what had been observed a few hours earlier. This slightly increased demand for more risky asset classes and, as a result, also reduced the scale of the dollar appreciation.

The EUR/USD quotations increased from about 1.1190 observed a moment in the afternoon to about 1.1230 an hour after trading in the USA started. This somewhat reduced the pressure on emerging countries' currencies, including the zloty. It continued to be the weakest of emerging country currencies today, but in the first hour of increased activity of the US investors, a shift of the USD/PLN quotations from about 3.99 to 3.97 and the EUR/PLN quotations from about 4.47 to 4.46 was observed.

The market receives different signals on pandemic issues in the US, which cause sentiment changes - but in a limited range of fluctuations. On the one hand, some states that have already "opened" up have experienced record levels of disease and hospitalization, while on the other hand, New York, which opened a little later, still supports a relatively high level of optimism and has indicated that yesterday's daily hospitalizations fell below 1,000 for the first time since March 18th.

In such circumstances of the unequal opening of states, but also of the world economies, it is difficult to make any more fundamental change in the financial market. Instead, its participants will be assessing the incoming data over the next few weeks and probably until September. Then we will have a clearer macroeconomic picture of the process of returning to economic normality (and the shape of this path), so at that time we can expect slightly greater changes in the financial market.

It will also coincide with the intensification of the US election campaign in November, which may also slightly deteriorate the sentiment. Especially as the rhetoric on international trade issues (US-China, US-EU) may get tougher, as we have seen in recent weeks.

Today the US Department of Labor published a weekly report on initial jobless claims. In the period of the pandemic, this index becomes slightly more important than usual - and it also gave some mixed signals today. A positive aspect of it was the fact that the number of claims continued to fall, but their number at the level of 1.48 million failed market expectations by 160 thousand. This slightly mixed picture of new jobless claims slightly improved the number of people already receiving these claims, which fell to 19.5 million, 0.5 million less than expected - and if we deduct revisions of the previous report - by 1 million less than the previous week.

Signals that reach the market should not change the sentiment significantly in the short term. It is currently at the stage of assessing the course of the opening of economies, the probability of more significant changes - including of the zloty - is not high. The end of next week may be important to maintain this relatively positive sentiment: the US labour market report for June will be published on Friday. The May report strongly exceeded market expectations and current optimism (in the context of recent weeks) is also based on it. The disappointment in the form of much weaker-than-expected labour market data could make the sentiment slightly worse, potentially weakening the zloty.