US industry exceeds expectations (Afternoon analysis 1.09.2020)

This afternoon, the EUR/USD exchange rate exceeded 1.20 for the first time since early May 2018. In the afternoon, significant data from the US industry were released.

According to the PMI index prepared by the ISM institute, the pace of economic activity growth in the US was the highest in August since November 2018, and the index itself, rising to 56 points, exceeded the median expectations by 1.2 points. It also continued the series of growths, starting from the bottom line in April.

If we look at the components of the index, the most important ones have clearly improved. New orders, exceptionally important, grew in August at the fastest pace since January 2004.

Was it a reaction to the 1.20 boundary or the impact of the data?

The higher industrial activity in August fits well with the series of positive macroeconomic data that recently characterised the US economy. Today's ISM statistics have somewhat reduced the scale of the dollar depreciation. However, this could also have been due to the EUR/USD exchange rate reaching 1.20, followed by a slight rebound to around 1.1940-1.1960.

It is likely that we will have to wait until the end of the week for a stronger movement in the dollar valuation. On Thursday, it will become clear whether the number of initial jobless claims will fall below 1 million in the US. On Friday, in turn, the labour market report for August will complete the picture of the US economy. Some concerns about the report's negative tone may have been mitigated by data on higher-than-expected industrial activity in August. If Friday's report also exceeds expectations, the US dollar may start to recover.

For the zloty, this could be a signal to weaken, but today the Polish currency is in good condition. In the afternoon, the USD/PLN exchange rate exceeded 3.68 (a few hours earlier, it was still below 3.66) along with a slight rebound of the dollar on the global market. The EUR/PLN exchange rate is still slightly below 4.40 (approx. 4.39 in the afternoon).

Increase in inflation will not harm the zloty

Today the data on consumer inflation from the Polish economy for August were presented. For the next consecutive time, the inflation rate fell by 0.1% month-on-month, and annually from 3.0% to 2.9%.

This publication did not weaken the zloty. The Polish currency may change more strongly on Friday. Although the weakening of the dollar is largely a matter of the monetary policy of the Federal Reserve, recent relatively better data from the US compared to eurozone readings may finally begin to be manifested in increased demand for the dollar, especially if Friday's report also exceeds expectations. In this scenario, the zloty may also weaken slightly from current levels.