The euro gets stronger and stronger (Daily analysis 15.07.2020)

On Wednesday morning, the euro continued to appreciate. The EUR/USD exchange rate reached around 1.1460, the highest level since the second week of March. The euro was also the strongest against the franc and the yen for about a month. The zloty profits from this situation.

Race of vaccine manufacturers

The increased demand for the euro in recent days is a result of the positive effects of the fight against the pandemic in Europe (compared to, among others, the USA), as well as an increase in optimism about the growth path of the economy, especially in the Old Continent.

This positive sentiment was supported by reports made last night of promising results of the already advanced coronavirus vaccine tests of one of the US companies. According to ITV reports, positive results of vaccines developed in Europe are also expected to be published soon.

The zloty gets support

Therefore, optimism is clearly increasing. The market is also waiting for the weekend Eurogroup meeting. It could provide positive reports on the aid package for the economies worth around 750 billion EUR. For the zloty, the scenario taking place on the market is favourable.

With the globally weakened dollar, the USD/PLN exchange rate fell to 3.90 today, i.e. to the bottom line since the second week of March. The zloty also gains in relation to the Swiss franc and the pound, positioning itself among the best-performing currencies in emerging countries. The Polish currency is also appreciating against the euro, and the EUR/PLN exchange rate dropped below 4.47 today, although yesterday it was approaching 4.50.

The Union divides 750 billion EUR, and China puts cards on the table

However, in the case of the EUR/PLN exchange rate, the zloty has quite limited space for appreciation due to the globally very good condition of the common currency. A potential deterioration in sentiment may also put upward pressure on the exchange rate. Thursday may prove to be a test for the currently prevailing sentiment.

Tomorrow, the European Central Bank's decisions on monetary policy will be announced, but before that, China's macroeconomic data will be published in the early morning hours, including GDP growth in Q2, industrial production and retail sales in June. If the data significantly fail the economists' expectations (GDP growth expected by 2.4% y/y and 9.6% q/q), the zloty may lose some of its profits earned today.