Ви отримали нашу картку від фонду?

Ви отримали
нашу картку від фонду?

Додайте її до свого профілю, щоб стежити за отриманими коштами.

Додайте її до свого профілю, щоб стежити за отриманими коштами.

Afternoon analysis 02.06.2017

2 Jun 2017 15:23|Bartosz Grejner

The market expected something different: the Department of Labor report missed expectations and caused a drop in the dollar. However, it positively affected the Polish currency which increased the chances of the positive trend to continue.

Weak data from the US labour market

The long awaited data from the US labour market missed expectations. Yesterday’s ADP report showed a 253k increase in private employment and sparked hopes for a solid official report coming from the Department of Labor the following day. However, those proved to disappoint the market with a reading not only lower than the aforementioned ADP data, economists’ expectations (182 k) but also the previous month – the private nonfarm payrolls increased in May by only 147k. This wasn’t the end of the bad news coming from the report. The average hourly earnings rose by 4 cents to 26.22 USD, which meant a 2.5% increase year-over-year, 0.1% below expectations. In addition, April’s growth was revised down from 0.3% month-over-month to 0.2%, similarly to May.

One of the few positives from the report was the unemployment number – the rate decreased in May to 4.3% (from 4.4% in April) which meant the lowest level in 16 years. However, its positive effect was limited – the unemployment rate has remained below 5% for over a year now and the rate alone doesn’t reflect the condition of the labour market. Its decrease doesn’t even have to be so positive: the participation rate dropped from 62.9% to 62.7% in May alongside it.

The dollar’s immediate reaction to the data was negative. EUR/USD spiked to 1,128, the highest level since the US presidential election on 9th November. If we omit the fluctuations from that day, today, the EUR/USD would be at its highest level since mid-September. The market will most probably now try to discount a lower probability of two additional rate hikes by FOMC this year, which could translate to a weaker US currency.

Investors could instead focus more intently on FOMC members’ speeches. Should they maintain the consensus for another two rate hikes for 2017, despite today’s weak labour market report, the dollar could ultimately gain. However, the chances of such a scenario in the upcoming days seem to be relatively low: from Tuesday, there will be a ban for all speeches, due to the upcoming FOMC meeting.

A great scenario for zloty

The Polish currency benefited from the weaker than expected data from the US. The zloty gained against most of the main currencies, the strongest against the dollar – USD/PLN dropped below 3.72 and closed in on the lowest level seen in over a year. The dollar’s weak condition after a poor report from the Department of Labor will most probably sustain the positive sentiment towards the Polish and emerging markets currencies that has been observed in recent months.

The zloty should then oscillate around this week’s levels. The current good sentiment could be spoiled by a deterioration of the business climate in Europe due to increased apprehension regarding the upcoming elections in Great Britain and Germany, among others. Additionally, should the consensus for two more rate hikes this year in the US be maintained, strengthening in the dollar could undermine the currently good condition of the Polish zloty. However, the chance of this happening in the next few days is very limited.

Next week’s events

On Monday, IHS Markit will publish both services and industrial PMI for the eurozone and selected countries for May (including Germany, France, the United Kingdom and the USA). This will be the second readings in the case of the eurozone and the USA. Therefore, inconsistencies are likely to be minor. However, the British PMI may significantly affect the pound, because this will be the initial reading of this index. In the afternoon, we will receive the American services ISM, which may cause volatility on the dollar. A reading higher than the previous (57.5 points) could strengthen the American currency.

On Wednesday, the Monetary Policy Council will reveal its decision regarding interest rates in Poland. Since no changes are expected, the MPC press conference will be a much more essential event. The MPC attitude has been fairly dovish recently. Moreover, the MPC chairman suggested the lack of rate hikes until the end of 2018. So far this attitude hasn’t had a significant effect on the zloty, which has been determined mainly by external factors. However, a worse sentiment in Europe could cause the zloty to submit to the dovish attitude from the MPC and lose value.

On Thursday, the European Central Bank’s meeting will be held. No changes in the ongoing monetary policy are expected in this case either. Investors will focus on suggestions regarding potential abandoning of the QE program and a more rapid monetary tightening. Previously, the ECB members were suggesting that the monetary tightening won’t happen before the end of the QE program, which has been prolonged until December. The euro would gain value in the case of suggestions about either abandoning or limiting the QE program.

 

2 Jun 2017 15:23|Bartosz Grejner

This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without acknowledgement of the source is prohibited.

See also:

2 Jun 2017 12:32

Daily analysis 02.06.2017

1 Jun 2017 15:30

Afternoon analysis 01.06.2017

1 Jun 2017 12:09

Daily analysis 01.06.2017

31 May 2017 15:12

Afternoon analysis 31.05.2017

Attractive exchange rates of 27 currencies