Currency summary of the week. Euro in red.

Financial markets are absorbed in information mainly from the USA regarding news from election campaigns and news from the eastern hemisphere about the situation related to  coronavirus. Moods in Europe can be considered strongly mixed. Despite good results of some companies from the DAX index, weak economic data pulled it slightly down. The pound, however, lost somewhat after Johnson's statements, which directly affected the issue of relations with the European Union and trade negotiations between it and Great Britain. In today's currency summary we will look at what moods, opportunities and threats await us on the currency market in the next sessions.

Reelection and USD

In the article we published last week (https://forexclub.pl/state-of-the-union-czy-dolar-zyska/) we have tossed some facts about how the upcoming elections could take shape. Therefore, in this text we will focus rather on a quick review of how Trump's speech actually affected the dollar. The first glance at several currency pairs, where the base currency is USD, is enough to say that it is doing not bad. One of the best examples is our zloty. Despite the fact that the PLN rebounded slightly testing the recent demand movement on the USD / PLN pair, we are observing a strong rebound and further appreciation of the US currency.

USD / PLN chart, H4 interval. Source: xNUMX XTB xStation

The downward movement took up about ⅓ of the upward movement. A strong rebound may indicate that this is not the end of the further USD / PLN journey to the north.

On February 6, we met mixed data from the US labor market. Despite the relatively neutral dynamics in terms of applications for unemployment benefits, they are falling, which is undoubtedly positive. The non-agricultural sector, whose productivity did not reach the expected (forecast) levels, was in a worse light.

It is worth adding that Friday we got to know very good readings from the US economy. Employment growth amounted to almost 200, while wages in annual terms 3%. The slight increase in the unemployment rate results exclusively from the increase in the participation rate.

Weak days for the euro

The euro was doing very well this week. PMI results from the services sector were not the worst. In general, it can be said that they are quite positive. Most of them balanced above conventional levels of 50 points. Most of the readings were in line with expectations and did not surprise investors. The aggregate indicator throughout the Euro Zone is at a very optimistic level. This demonstrates that the European services sector is doing well and is in vain to look for signs of recession. On the other hand, GDP is worse, which has disappointed expectations for growth. It is hardly surprising, however, because of the poor 2019 for German industry.

Chart EUR / USD, H1 interval. Source: xNUMX XTB xStation

The strong depreciation of EUR against the dollar was not the result of the market ignoring good data from the Eurozone. His weakness was determined by a strong dollar, whose fuel is not only coronavirus and upcoming elections, but also poor GDP.

Czech bank surprise of the week

A very interesting situation that happened last week was the decision of the Czech Central Bank regarding interest rates. Despite the lack of market expectations for them, they were raised by 25 basis points. The current interest rate is 2,25%. The Czech koruna alone is not a currency with extremely high volatility. However, thanks to this decision she could gain some proverbial freshness against the dollar. At the end of last week we could observe its strengthening.

USD / CZK chart, H4 interval. Source: xNUMX XTB xStation

We should not expect a permanent weakening of the dollar against the Czech koruna. This is mainly demonstrated by quite impulsive and strong, green demand candles. In the "red zone", which I marked on the chart, there is a red candle with a large bottom wick. This proves above all about the strength of the dollar in this zone.