Afternoon analysis 02.07.2015

Weak labor market data pressured the dollar. The Greek crisis suspended to the next week. The zloty was stable.

The US labor market data was weaker than expected. Today's numbers missed the forecasts. The monthly data on the labor market were published today due to the bank holiday on Friday.

The non-farm employment sector added 223k employers. A result below the 231k that was forecast. Moreover, revisions were quite severe. Revisions to prior reports cut a total of 60k from payrolls in the previous two months.

Other reports were also mixed. The participation rate dropped to the lowest level in almost 40 years. In June it stood at 62.6 percent. It has not been so low since October 1977.

And finally, the wages growth disappointed. It was flat in June. While the forecast was for a 0.2 percent increase. Given the weak wage growth, the Federal Reserve inflation goal will remain hard to reach. It the absence of significant wage growth, the inflation rate rebound is not very likely, as the consumption remains dampened.

Moreover, the unemployment claims report missed the expectations. The number of new unemployed people increased to 281k. A result slightly worse than the forecast. Although a result below 300k signals the good shape of the labor market, a broader look at the employment situation limits optimism. Especially in the context of expectations that the consumption growth will support the inflation rate.

Nevertheless, today's report was not enough to alter the expectations for interest rate hikes. And the September term remains valid. However, the report was sufficient to weaken the dollar in spite of the Greek tensions.

Market is waiting for the referendum

The European politicians signaled that there will be no negotiations with Greece before the Sunday referendum. As a result, the Greek crisis will be suspended to next week. However, the Greeks have to face the reality of no banking system, which severely hurts the economy.

Today, the Greek Finance Minister Yanis Varoufakis said he will resign if the Greeks vote for the bailout program. It is very likely, that the Syriza government will also resign. However, it has not yet been said.

The latest polls gave no answer to whether the outcome of the referendum will be positive. The tendency is however optimistic, as the majority is leaning towards "yes" for austerity (47 percent for, and 43 percent against). The Greeks were told by the European politicians, that a "no" will mean that the nation is willing to leave the eurozone.

Stable zloty

Weak reports from the US labor market hit the dollar. The situation was exploited by the zloty, which recouped some of its recent losses against the US currency. The zloty was rather stable against other major currencies. For a moment, the frank dropped below 4 zloty. However, as long as the future of Greece is uncertain, the likelihood of a stronger zloty is limited. If the Sunday referendum outcome is positive, the zloty will increase.