Afternoon analysis 01.02.2017

Solid data from the US - both the ADP and manufacturing ISM markedly above forecasts. The Federal Reserve statement may give relatively few hints on further monetary actions. The zloty remains stable except for a slight increase in the dollar value.

Solid ADP. ISM above forecasts

At 14.15 the ADP readings were published. The private sector jobs increase surprised positively. Economists expected 168k number (consensus range 140-208k.) while the actual data showed that the US payrolls grew 246k.

The employment change structure also looks optimistic. In previous months, the economy created mainly service sector jobs while mining, construction or manufacturing remained unchanged. In January, however, goods-producing sector employment increased by 46k, the highest reading since the end of 2014. It was also encouraging that small business rose 62k.

It's difficult to say if today's data relates to the US election. It may be either a sign of relief after the voting or more companies in mining sector are seeing incoming orders due to commodities prices increase and they decided to boost employment.

More positive surprises came from the manufacturing ISM data. In January one of the most important leading indicator in the US rose to 56 points level which is the highest reading since the end of 2014. The key components of the index increased marked. The employment component jumped to 56.1 points while both new orders and production exceeded 60 points mark.

After a series of data today's the dollar gained in value, and the EUR/USD fell about 50 pips to 1.0740. In general, however, for such good readings, the reaction is quite muted. Without protectionist comments from the new US administration the currency pair would likely have been significantly lower.

The FOMC may be neutral. Calm trading on the zloty

At 20.00 the Federal Reserve is set to publish a statement after its two-day meeting . Probably it will be relatively optimistic on the economy (moderate growth, a strong labour market, rising, but below the inflation rate). However, there is very little chance that the Fed hints interest rate hike in March, hence investors reaction may be muted.

Much more information supporting the desire to further increases interest rates or a wider discussion regarding reduction of the Fed's balance sheet may appear in the "minutes". These, however, are set to be published in three weeks period. Generally the FOMC meeting shouldn’t be a groundbreaking event.

The US data had a relatively limited impact on the the zloty. Only the dollar rose about half percentage point. Both the euro and the Swiss remained unchanged, what also confirms that global investors have not yet regained their faith in a more stable growth in the USD, after solid macroeconomic data from the United States.