Zloty at the forefront of the EM (Afternoon analysis 14.07.2020)

Globally strong euro strengthens zloty's condition. The Polish currency was the strongest among the emerging countries currencies this afternoon, reaching its highest value in a month in relation to, among others, the franc and the pound.

The afternoon was marked by the further strengthening of the euro in the global market. The EUR/USD exchange rate reached about 1.1400, setting new highs for just over a month. Moreover, there was also not much missing to exceed the upper limit of quotations since the first half of March (about 1.1423), i.e. the period of the greatest currency market fluctuations during the pandemic.

The euro appreciation is the result of both the positive effects of coping with the pandemic in Europe and the market expectations for a 750 billion EUR recovery package for the EU economy. This weekend, an agreement may be reached between EU countries on this matter. It may be a potential positive stimulus for the market and keep the euro in a relatively good condition.

Small companies, great performance

The high listing of the euro is also possible because we continue to see the global weakness of the dollar. This is the aftermath of the monetary stimulation of the Federal Reserve and mixed signals from the US economy. On the one hand, we have a flawed exit path from the lockdown by re-imposing restrictions (e.g. yesterday's California). On the other hand, we have macroeconomic data that do not justify a deterioration in sentiment that could potentially lead to the return of a stronger dollar.

PMI indexes surprised positively, as did the reports from the labour market (although overall, the data are still terrible). Today, the NFIB Small Business optimism index in the USA in June also came as a positive surprise. It rose to 100.6 points, approaching the pre-pandemic levels of February (102.9 points) and clearly rising above the expected 97.8 points. This may indicate that the smallest companies in the economy show great resilience to the effects of the pandemic. This is an optimistic sign for investors as to the return of the economy to the right track.

Zloty triumphs in the afternoon

Mixed signals from the US and stimuli from Europe that keep the EUR/USD valuation at a relatively high level are still positive incentives for the zloty. The Polish currency is the strongest in relation to the franc and the pound (CHF/PLN approx. 4.18, GBP/PLN 4.915) this afternoon, and in relation to the dollar (USD/PLN approx. 3.92) over a month.

A slightly different story is true for the EUR/PLN exchange rate. Here the quotations are still within a rather narrow fluctuation range but in a slight upward trend. This is the result of the globally stronger euro recently. Tuesday afternoon was favourable for the zloty, which was the strongest among the emerging currencies in relation to the dollar, the euro, the franc and the pound.