The U.S. dollar starts the month on the front foot. Risk appetite recovers after a volatile last week of January. Equities rise, similarly, energy commodities advance.
Since the start of the month, the greenback (the USD) has gained against all major peers. The EUR/USD pair drops towards the 1.20 handle and the common currency underperforms. The EU’s vaccination programme lags behind, and the ECB is unwilling to allow further euro gains. The GBP/USD exchange rate goes below 1.37 but continues to trade at elevated levels. The USD/JPY hovers around 105.00.
In the emerging markets space the South African rand trades strongly after Covid restrictions were tentatively eased. Noteworthy, the Polish zloty emerges as one of the best performers. The EUR/PLN pair has already declined for days in a row and now trades close to the 4.50 mark. This level is widely perceived as a trigger for further interventions aimed at weakening the Polish currency. Given the upcoming MPC meeting (on Wednesday) and a publication of an interview with governor Adam Glapinski, a substitute for an (on Friday) verbal actions are more probable for now. If they fail, selling the zloty on the market may arise as a tool of the last resort.