Afternoon analysis 30.09.215

Fairly good data from the US jobs market gives some boost to the dollar. Polish inflation below the market consensus. Poland gained in the competitiveness ranking, but in the innovation index it is below Ukraine.

Mixed ADP report

The ADP report on employment in the private sector is regarded as a fairly good estimate before the official Labour Department publication despite the fact that the initial reading sometimes indicates the wrong direction. However, in the longer run both readings are very similar.

The ADP publication from the US was slightly better than expected. The number of new payrolls rose to 200k while expectations were around 190k. However, the employment in manufacturing dropped by 15k which was the lowest reading since December 2010.

Overall the data seems to be mixed. A better headline reading should give some boost to the US dollar, but shrinking production employment can suggest that the global situation remains unfavourable and the the mining industry cuts jobs due to a fall in commodity prices. The incoming monetary tightening may deepen this trend at least in the short run.

As a result, the EUR/USD should wait for the end of the US equity and fixed income trading. If stocks finish the day with solid gains and two-year treasuries rise to around 68 bps then the EUR/USD should drop below 1.1200 mark.

Lower inflation

Today the GUS published the preliminary inflation reading for September. The data turned out to be below the consensus. Deflation deepened for minus 0.6% to minus 0.8% while economists expected minus 0.7% y/y. It pushed the EUR/PLN higher to almost the 4.25 level.

The inflation data was quickly commented on by the MPC member. Elżbieta Chojna-Duch said that lower inflation was pushed by a slide on commodities and she does not see reasons to change the monetary policy. Chojna-Duch also claims that lower gasoline prices are positive for the economy.

Yesterday the World Economic Forum (WEF) published the new competitiveness index. Poland ranks 41 in the world, which is a 2-point improvement. There is, however, a weak spot in the Polish performance – innovation. Our economy ranks in that category at 64. It means that not only economies in our region surpassed the Polish result (Hungary – 51; Czech Republic – 35) but also Honduras, Thailand, Turkey and Ukraine received a better grade in that category.