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The pound is under pressure (daily analysis 8.09.2020)

8 Sept 2020 15:41|Bartosz Grejner

The weaker sentiment during the Tuesday trade weakens the zloty slightly. The main currency pair is still around 1.18. Pressure on the pound leads the GBP/USD pair right to the key level of 1.30.

Risk aversion increased on Tuesday

The trade on Tuesday was held in an atmosphere of increased aversion to risk. After yesterday's rise on the European markets today, we have seen an increase in supply pressure, which affected the sentiment. After a day off on Monday (Labor Day), the US markets also resume trading today.

And around this, too, there may be some concerns, because there were strong drops at the end of last week and before the long weekend overseas. The fears arise particularly around technology companies - an hour and a half before the start of the session, Nasdaq futures fell over 3%.

Apart from fears of further depreciation of technology companies, concerns about another wave of coronavirus infection in Europe are beginning to come true to some extent - substantial increases were recorded during the previous day in France and Germany. In addition, the general sentiment may also be affected by the geopolitical pressure that has recently been increasing.

The significantly tightened rhetoric by Prime Minister Boris Johnson on the UK's trade agreement is already increasing the pound sell-off strongly - the GBP/USD fell today to its lowest level in a month, just over the 1.30 boundary. This pressure in the context of international trade has been intensified in the last few hours or so by President Donald Trump, who has announced the reduction of economic dependence on China, including punishing American companies with taxes that outsource employees. The background to this is, of course, the presidential elections at the beginning of November (and to Congress), but it is also not a factor that keeps the market in positive sentiment.

The euro awaits the ECB

The main currency pair, i.e. EUR/USD, remains surprisingly stable for the time being. The dollar gained about 0.2% to the euro this afternoon, but the exchange rate still oscillates around 1.18. Probably only a fall below 1.1760 can put the dollar on a growth path, at least in the short term. However, market participants may refrain from major changes before Thursday's ECB-related events (publication of a statement and a press conference of the President, Christine Lagarde).

With a slightly weaker sentiment in the broader market, most of the currencies of emerging countries have come under increased supply pressure. Including the zloty, whose losses to the dollar, the euro or the franc, however, were limited to 0.3% in the afternoon, compared to yesterday's closing with the EUR/PLN exchange rate of about 4.445, USD/PLN 3.767, CHF/PLN 4.10. This story does not apply to the pound, which due to the increased uncertainty surrounding the UK's trade agreement with the EU, lost value again, and the GBP/PLN quotations were 0.6% below yesterday's closing, about 4.91 - the lowest level in a week. This uncertainty will not disappear quickly, so the supply pressure on the British currency may also increase, especially if it is accompanied by a potential strengthening of the dollar in the meantime.

8 Sept 2020 15:41|Bartosz Grejner

This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without acknowledgement of the source is prohibited.

See also:

7 Sept 2020 18:55

The zloty pared some losses (Afternoon analysis 7.09.2020)

7 Sept 2020 14:19

Strong drops in the pound's valuation (Daily analysis 7.09.2020)

4 Sept 2020 18:45

Increased employment and falling unemployment, a strong push for the dollar (Afternoon analysis 4.09.2020)

4 Sept 2020 13:38

The zloty weakens before the publication of the report from the US labour market (Daily analysis 4.09.2020)

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