Daily analysis 04.09.2015

The consequences of yesterday's testimony from Mario Draghi are still visible on the market. The investors are focused on data from the labour market. The zloty quickly corrects Thursday's enforcement to the euro.

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

• 14.30: Readings from the American labour market. New workplaces in non-agricultural sector (estimations: +215k); unemployment rate (estimations: 5.2%); an increase in salaries (estimations: +2.1%).

Consequences of the dovish EBC

In yesterday's afternoon analysis we presented the main elements determining the dovish reception of the EBC meeting. Most of all, estimations regarding the economic increase and inflation for the coming years, were reviewed downwards. Additionally, the central bank will be able to buy more of the given issue of treasury bonds. This theoretically opens the door wider to increase the monetary stimulation.

Mario Draghi denied that changes in quantitative easing were discussed during this meeting. However, answers to the questions of the reporters and the announcement itself, suggest that the EBC will not hesitate to extend the QE, if inflation is not moving towards the target of the central bank.

The quite sudden actions of the monetary authorities from Frankfurt may seem surprising. It can even create additional anxieties, especially on the emerging markets. They were mentioned as the main reason for the downward review of the prognoses. The approach is also surprising, if one considers the testimonies of the central bankers in Jackson Hole.

On the other hand, it is possible that yesterday's actions of the EBC will have a wider aspect. In Thursday's analysis we published the suggestions from the IMF economists. They advised the main central banks to have a milder approach towards the monetary policy. 24 hours ago it seemed very unlikely that the EBC will listen to this advice. However, Draghi practically fulfilled it. Thus, it is possible that the Fed will also take them into consideration during its meeting in September. This may also be an argument for the market to wait with the sale of the euro, and the EUR/USD will not go below 1.10.

Day with the labour market

It is the first Friday of the month, so the Department of Labour will publish data regarding new workplaces created by the American economy. The economists' estimations are close to the level of 215k. The unemployment rate is expected to go down to 5.2% and salaries are expected to decrease by 2.1% in the year on year relation.

The reading of the payrolls is as usual crucial. However, it is difficult to expect that the Federal Reserve will make the decision regarding the hikes in interest rates, based on single data. Even though, the market considers today's publication as one of the most important this year.

This of course does not change the fact that if the reading is below 170k (along with the review of minus 30k), the dollar should visibly wear off and the EUR/USD can cross 1.12.

On the other hand, with solid data (which cross the estimations by 30k) and an increase in salaries faster than expected, the American currency should gain value. However, it is unlikely to cause an increase in interest rates on the Fed meeting in the middle of September. Thus, the first reaction can be relatively sudden, but eventually the EUR/USD may not fall below 1.1100.

Few words about the foreign market

After yesterday's dovish meeting of the EBC, it was possible to avoid a bigger overvalue of the EUR/USD. It was influenced by speculations that Draghi's pessimistic approach towards the emerging markets, may stop the Fed from an increase in interest rates. A similar situation can be seen during today's payrolls. Thus, even if the publication is good, the dollar may not be clearly enforced.

In the wider context, it is worth focusing on the meeting of the G20, which starts today in Turkey. The ministers of finance and central bankers from the world's greatest economies will probably discuss the situation of the emerging markets. It is possible that this meeting can bring clearer answers regarding the condition of China, and its hypothetical stimulation of the Polish economy. If such actions are suggested, the currencies of the emerging markets will be the main beneficiary.

The zloty gives away yesterday's increases

The optimism on the national currency caused by yesterday's dovish meeting of the EBC, faded away quite quickly. A similar situation could be observed on the stock markets of western Europe. Sudden changes in sentiment are caused by difficulties in interpretation of the EBC actions. Will the central bank want to stimulate the economy (which is positive for the capital market)? Or is it rather afraid about its slowdown, which will cause a decrease in profits of enterprises, irrespective of the monetary policy? Clearly this latter concept prevailed today.

When it comes to a hypothetical reaction of the zloty for today's payrolls, it should be relatively moderate on the EUR/PLN pair. It is unlikely for it to leave the range of 4.22-4.24, irrespective of the scenario. Bigger changes should be expected on the USD/PLN. If the publication is good, it can even go to the area of 3.83.

Anticipated levels of PLN according to the EUR/USD rate:

Anticipated GBP/PLN levels according to the GBP/USD rate: