Afternoon analysis 03.02.2017

The high amount of new workplaces in the non-agricultural sector confirms positive readings from the ADP. However, the dollar lost its value due to a significant decrease in growth of salaries. The zloty remains strong against the main currencies.

Negative report for dollar

In today’s daily analysis, we wrote a lot about the data from the American Bureau of Labor Statistics (BLS). We took note that ADP and ISM have increased chances for a potentially positive reading of payrolls.

According to the BLS data, the American economy created 227k new workplaces, which was 47k more than estimated. This is a positive information, but the fact that the data for the past two months has been revised down by 39k is negative. This decreased the effect of a positive surprise for January.

However, BLS not only revised the data for November and December, but also for the entirety of 2016. This revision was positive 80k, which is not a large value next to a total of 2.24 million increase in employment, as well as a total of 145 million workplaces. However, the entire report looks more positive due to this result.

The matter of salaries was completely different. Moreover, we emphasized that the economist consensus may cause that the data may be inconsistent with the market expectations today.

The average hourly wage only increased by 2.5% YoY, against the expected 2.7-2.8%. This takes pressure off of the Federal Reserve to raise interest rates. Moreover, this data suggests that the unemployment rate, which is slightly below 5.0%, does not have to mean full employment and there is a chance to activate people who are not active in the labor market.

This data is negative for the dollar. We may claim that they completely rule-out rate hikes in March. Some of the Fed members may even withdraw from the concept of three rate hikes this year. Moreover, the financial press will most likely ask the Fed members questions regarding whether they are disappointed with the data about salaries. This increases chances for extending the weakness period for the dollar.

No surprises from ISM and stable zloty

The American ISM was slightly lower than expected (56.5 vs 57.0). However, its structure was relatively positive. The production component was slightly above 60 points and the employment component increased from 52.7 to 54.7. Despite a decrease in the new orders index, its value at the level of 58.6 points is relatively satisfying.

Due to negative data from the USA, as well as a decrease in expectations regarding rate hikes by the Fed, the EUR/PLN was temporarily below 4.29. However, the pair returned to the area of 4.30 PLN after approximately an hour. Perspectives for the zloty remain positive, because the global anxieties regarding hawkish policy from the FOMC, will most likely not be fulfilled for the time being.