Daily analysis 02.12.2016

A fall of the dollar’s value and the profitability of the US treasury bonds. The data from the labor market should take initiative today. A strong weakening of the zloty during the session in the United States might be partially revised. The euro is at 4.49 PLN, and the franc at 4.15.

Most important macro data (CET – Central European Time). Estimations of macro data are based on Bloomberg information, unless marked otherwise.

• 14:30 A situation on the American labor market (survey: employment +180 thousand; Unemployment rate: 4.9%; hourly salaries: +0.2% MoM and +2.8 YoY

A revision of the recent trends

During a session in the USA we had more records broken on the market of the treasury bonds. The profitability on the 5 year instruments were reaching the level of 1.93%, what was the highest result since May 2010. On the other hand, the US 10 year bonds offered almost 2.50%, which means that since the minimums reached right after the election, they increased by as much as 80 base points.

The movements described above were caused by more strong increases of the crude oil quotations and better than expected readings from the US industrial ISM. During his interview for Bloomberg TV channel, the head of OPEC, Mohammed Barkindo clearly maintained his stance regarding lowering the production by the countries from outside the cartel by 600 thousand barrels per day. According to Barkindo, the negotiations are conducted by the Russian Minister of Oil, Aleksander Novak, and the details will be clarified during the meeting of everyone involved in Doha on December 9.

The dollar was supported (especially against the currencies of the emerging countries) by the solid reading of the ISM index. The index presenting the future shape of the industry increased to the level of 53.2, what exceeded the expectations of the market by almost 1 point. Also the subindexes of the new orders and production increased. The latter reached the level of 56 points, which is its best result in almost 2 years. The employment component disappointed a bit (fall by 0.6 point to the level of 52.3 points), however, the general data show that the chances for the American industry to come out of stagnation observed for a few quarters now are increasing. Additionally, the increase of the oil prices and changes in taxation announced by the new US administration should support both the industrial and services ISM in the months to come.

Despite the good data, the trends which were priced before didn’t maintain until the end of the session in the USA and the dollar started to lose value. Also shares and profitability of the American debt were falling. It cannot be ruled out that the investors decided that the most recent changes are happening too quickly and there’s higher chances for a more significant revision. Additionally, today there’s a publication of the data on the American labor market planned. The ADP reading should not cause any concerns for the shape of employment in the US, however, the short term data of the Labor Department tend to differ from the ADP estimations. Thus the demand for the dollar or higher expectations regarding the future inflation have significantly slowed down.

The data from the USA

Traditionally, the publication of the data from the Labor Department is planned for the first Friday of the month. Probably the reading of the new jobs in the non-agricultural sector about 150-200 thousand will not cause any significant changes on the market. However, if along with the revisions there’s a deflection from this interval, the stronger movements can be anticipated.

It cannot be excluded that the data on wages will be much more important than the payrolls. In October they increased at the pace of 2.8% YoY, what was the best reading since the crisis. If this level is exceeded, and along with it – the today’s forecasts , there’s chances of flattening the yesterday’s revision on the dollar.

Close to 4.50 for the euro

Yesterday’s evening was exceptionally unfavourable for the zloty. The increasing profitability of the American treasury bonds at the time when the debt market in Poland was already closed, forced adjusting to the new conditions only through the currency channel. It also didn’t help that other currencies from the emerging countries were weakening. However, the overall situation today should stabilize a bit and if there are no significant global changes, then the euro will fall a bit before it closes the week above the level of 4.50 PLN.

Today investors might be concerned a little with the rating overview by the S&P. However, taking into consideration the statement from the beginning of July, the basic threats defined by the agency (loss of the independency by the central bank, the collapse of the fiscal situation) didn’t come true. There was in fact the reduction of the retirement age, what is fundamentally unfavourable, but the effects of it will not be visible until 2018, and until then it is possible that changes to the taxation system increase the state’s income. As a result, we do not expect any changes to the Poland’s credit rating by the S&P.