Weak dollar, stable zloty, strong gold (Daily analysis 9.07.2020)

Recently, the dollar has weakened again. During the Asian session, the euro/dollar exchange rate rose to its highest level in a month, i.e. around 1.1371. In the morning, the EUR/USD pair fell slightly as European investors became more active, but it is still above the 1.13 boundary and right at yesterday's closing level.

Concerns reflected in gold

The weaker condition of the US currency also keeps gold price above 1800 USD per ounce, which represents the highest levels since 2011. Although positive sentiment prevails in the market, the increase in the price of gold suggests that market participants are aware of the risks related to the new wave of coronavirus (yesterday, among other things, the US disease records) and are protecting themselves against a negative scenario later in the year.

However, at present, this does not affect positive sentiment, and the market is focused on the recovery path, largely ignoring macroeconomic data.

German economy slowly recovers

Today, another set of statistics from Europe's largest economy has been released. Destatis reported that exports in Germany grew in May by 9% on a monthly basis, even though it was expected to increase by 14%. Imports also showed a weak performance, with only 3.5 % growth, while the market consensus indicated a 12.4% growth. This is an improvement compared to April when exports fell by 24 %, and imports dropped by 16.6%, but this is not the rapid growth path the market expected.

Both the demand and supply are disappointing, indicating that the beginning of the restart of the German economy was somewhat slower. However, this raises a rather important question to which the market does not have a good answer. Will the sharp increases in activity be more favourable in the long term than the slower, gradual return of this activity?

Strong increases in macro data may indicate that enterprises and individuals are less cautious, potentially exposing themselves to infection. This is the case in some states in the US, where restrictions are being reimposed.

This fact illustrates just how uncertain time is for the economies and the financial market. The next months, when we will know the activity data from July and August, will give some more clarity about the potential growth path. They will probably also illustrate a problematic fact for this recovery path: strong imbalances between economies, which may also have a significant impact on currency valuations later in the year.

The Polish currency without much changes

The Polish currency remains in a limited fluctuation range. There are few significant changes in the broader market, so the impulse for price changes remains reduced. The EUR/PLN quotations were in the range of approx. 4.46-4.47 PLN until midday and the USD/PLN quotations were in the range of 3.94-3.95 PLN, which does not differ from the ranges observed in previous days.

Later in the day, we can observe slightly increased fluctuations in the dollar due to the publication of the weekly report on jobless claims in the USA - but this should not significantly change the dollar.