Disturbing foreign trade (Daily analysis 12.03.2018)

Data from the US had limited impact on the US currency. The market awaits the CPI inflation publication scheduled for tomorrow and next week's Fed's meeting. The Polish Central Statistical Office's data on foreign trade surprised. The EUR/PLN pair is quoted between 4.19-4.20.

The most important macro data (CET - Central European Time). Surveys of macro data are based on information from Bloomberg unless noted otherwise.

• A lack of macro data may noticeably impact the analyzed currency pairs.

Labour market with limited impact on the dollar

Friday's readings from the US labour market clearly supported market quotations. However, the reaction to debt instruments was relatively limited and practically invisible on currencies. Why did the employment growth not increase the dollar?

The increase in the number of employed people combined with the increase in the percentage of participation and the lack of change in the unemployment rate is a sign that some professionally inactive have started to look for or have found work. This is very good information for the economy and means its potential is likely to grow.

However, the unemployment rate remained unchanged, which means that there was no increase in pressure on wages. This has been confirmed by the data on the hourly wage change. Its growth pace slowed down (from 2.8 to 2.6% year-on-year). Lower inflationary pressure connected with a growing number of employees is positive for the economy, but not necessarily for the dollar, especially in the short term. It shows that the economy can develop faster (more employed) without increasing functioning costs of e.g. enterprises.

As a result, this may mean that expectations about interest rates will remain unchanged rather than rise despite the increase in the number of employees. This caused a good day on the market, limited changes in bonds and almost no movement on the dollar.

In the coming days, February's readings on CPI inflation may attract some attention. Although this is not the Fed's preferred price change index, FOMC may be able to give some hints about future interest rate projections before the FOMC meeting next week.

Deficit again. Weak export

The zloty probably remained under the influence of last week's MPC meeting. Its dovish tone (also in the context of today's publication of the NBP inflation report) may continue to be a burden on the zloty, especially if market sentiment worsens.

The Polish Central Statistical Office's data on January's trade exchange may also be disturbing. A negative balance of foreign trade in goods (in December it was about 5.5 billion PLN, and in January it amounted to 2 billion PLN) is observed for the second consecutive month. At the end of last year, it was expected to be a one-off event, but another month with a deficit may be a sign of a decline in the competitiveness of the Polish economy.

In the case of export yearly adjusted and expressed in the euro, it increased only by 4.8% year-on-year (by 0.6% YOY in the zloty) in January. Import dynamic was by 6 percentage points higher. In the whole of 2017, export dynamics were around the level of 10%.

As a result, local factors will more often cause a weakening of the Polish zloty (dovish Polish MPC and balance of foreign trade). However, as long as the external situation remains positive, the weakening of the zloty is unlikely to be expected.