The specter of further declines weighs on stock exchanges

The beginning of the week seemed fairly calm. The fears about the further development of the epidemic had subsided, and the markets were slowly beginning to make up for the last discounts. Nevertheless, the information that reached investors was not optimistic enough to sustain a few stronger demand movements. Sentiment is still mediocre and the situation is still far from under control. We have suddenly had several interest rate cuts to help economies recover. Despite these actions, the sale is still going on, and the withdrawal, which we observe mainly on indices, oscillates around a few percent. The first week of March ended quite pessimistically. Will the next sessions be just as bad? We invite you to a short summary.

Indexes at a glance

Investor interest in the monetary easing policy has gone to the background. The current maneuvering at interest rates is aimed at dealing with the slowing economy. In this connection, do we have the real specter of recession on the horizon this year? On the one hand, we could say that it is possible. On the other hand, lowering interest rates is not a "typical" pre-recession procedure. Probably lower interest rates on loans (following these changes) will only prolong the slowdown phase. Considering also the time the market will experience these changes, it can be assumed that they will coincide with better data on combating the epidemic (assuming that it will not develop rapidly). Is this associated with impulsive reflection in the coming weeks?

Chart S & P 500, H1 interval. Source: xNUMX XTB xStation

Employment data hit the market in the United States. Their substantial growth is not the result of an unstable or weak economy. Of course, this is data for the previous month, although even then the world was struggling with an epidemic. The unemployment rate still remains at 3,5%, which is a really great result. The economic situation is doing well and the current situation, according to the rhetoric of the US President, is only a consequence of global problems with coronavirus.

On the US500 index we observed a slight rebound on Friday. Of course, it is not a premise to expect huge demand movements suddenly. However, there is a chance that this will happen at least in March. The index, as is known, is a collection of companies, therefore their (currently good) economic situation should not allow further wave of sales. The downward movement we see in the chart is not a natural estimate of poor performance, but only the panic caused by the epidemic. Therefore, there is a good chance that in the near future (in the absence of alarming information about coronavirus) the exchanges will return to normal operation.

Ignorance of the dollar

The President of the United States, Donald Trump is very optimistic about the vision of returning markets and further increases. To support it, he announced the signing of an act aimed at mobilizing the amount of 7,88 billion allocated for market stimulation. He emphasized that he did not know whether it was really urgently needed. However, in view of the upcoming elections, the current president wants to show that during his tenure the economy was doing very well, and the indexes that broke historical peaks were fueled by a well-managed state that favors general development.

USD / PLN chart, H1 interval. Source: xNUMX XTB xStation

Monday brought considerable volatility on the Polish stock market. The emergence of new disease outbreaks in Europe has been gradually overestimating the largest companies throughout the week. Despite at least the relative stabilization of the situation in Asia, this is not a sufficient argument to stop the wave of supply. Given the high inflation in the country, even in the wildest speculations it is difficult to assume a solid rebound. First of all, PLN XNUMX suffers from this. At present, the Monetary Policy Council is not worried about inflation readings.

The dollar has recently been quite ignorant of any macroeconomic data. The outbreak of panic associated with the virus did not show up much on the USD. On the contrary, the previous valuation did not cause major appreciation movements on the US currency. This situation has made some room for depreciation of USD against the zloty. We currently have to pay 1 PLN for 3,8041 dollar. From a technical point of view, we are currently at a key resistance, the exceeding of which may redefine increases in USD / PLN quotations. Dull situation on the Polish stock exchange (general panic on the Old Continent) and calmer global sentiment may outweigh the next strengthening of the American currency.

Antipodes

The NZD / USD pair boasts very interesting quotations. Antipode currencies are doing quite well against the dollar. To a large extent, NZD's appreciation resulted, among others, from the market's expectations for interest rate cuts in the US (which followed later). Thanks to this, the New Zealander could make some room for appreciation against USD.

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

The strength of the New Zealand dollar is supported, among others, by relatively low and constant inflation, which has practically not exceeded 2017% since mid-1,9. It is of great economic value due to the low probability of an unexpected price jump. This stability definitely has a positive effect on NZD appreciation. From a technical point of view, the NZD / USD exchange rate is in the upward channel, which is supported by confirmation of exceeded resistance levels.