We begin the month with calm trading across multiple assets, mostly due to the absence of American investors celebrating Labor Day. Despite this, the Polish Złoty (PLN) is trying to take advantage of a weak US Dollar (USD), improving its position against major currencies. Industrial PMI from Europe slightly improves the sentiment around the European economy, but still struggles to reach positive territories. Key readings will come from the US later in the week, potentially shaping sentiment at the start of September.
EUR has weak reaction to PMI
Preliminary European PMI readings for August, which measures business sentiment, have greatly affected the already low morale around Eurozone economies. The final data slightly improved this sentiment, but many are still far from reaching the 50-point threshold, which separates recession from expansion. However, in such a bleak atmosphere, any improvement and exceeding expectations are taken as positive. Spain was the only country performing below expectations, yet barely keeping its head above water with 50.5 points. Italy is on the brink with 49.4 points. The biggest positive surprise comes from France, where industrial readings reached 43.9 points. Germany slightly improved to 42.4 points, but has become a burden for the Eurozone after leading it for a long time. Hence, the total score for the Euro area jumped to 45.8 points. This data exerted limited influence on the common currency’s outlook. Strikingly, the UK continues to present the best results at 52.5 points, and Poland confirms its growth trend, this time reaching 47.8 points.
Postitive developments surrounding CHF
The situation in Switzerland appears increasingly optimistic, as the alpine country surprised markets today with its published data. Regarding its industrial PMI, it stands at 49 points, significantly beating previous results and forecasts (43 points). Furthermore, year-on-year retail sales, which fell by 2.6% in June and was projected to fall by 0.2% in July, recorded a growth of 2.7%. Consequently, the latest decisions by the Swiss National Bank to cut interest rates seem quite sound. Yet, at the same time, these positive data might preclude further cuts. This should support the Swiss Franc (CHF) in the near future. This afternoon, the CHF exchange rate exceeded 4.54 PLN.
EUR/USD awaits the Americans
As previously mentioned, Monday’s trading is not the most exciting, mainly due to American investors celebrating Labor Day. The EUR/USD rate is slightly correcting after recent declines, moving from 1.105 to 1.106 USD. It’s tough to discern any directional movement currently, with “consolidation” best describing the current state. A more significant impulse could come tomorrow with the release of the leading ISM index for the US economy. However, the most crucial reading of the week comes on Friday with data from the US Department of Labor. Last month’s NFP shook markets, causing significant tremors across stock exchanges. It may now set the final expectations for the Federal Reserve’s rate cuts, with the market currently pricing in a 30% chance of a 50 basis point move. In between, on Wednesday, we’ll know the decision of the Polish MPC. Any influence on the Złoty, however, is unlikely due to the continuation of the hawkish policy and rhetoric. The Polish currency is doing quite well in today’s trading, with the EUR/PLN moving towards 4.27 and USD/PLN heading towards 3.86. Interestingly, despite a dismal European stock market environment, the Warsaw Stock Exchange’s WIG20 index is performing exceptionally well, gaining up to 1.7%. Yet, this conclusion should be taken with a grain of salt due to lack of major global players before 3 PM as turnover doesn’t exceed a meager 500 million.
Author: Adam Fuchs, currency analyst for Walutomat.pl
Source: https://ceo.com.pl/spokojny-poczatek-wrzesnia-36043
