Daily analysis 04.09.2017

A mixture of macroeconomic data from the US, future actions from the ECB and geopolitical tensions are affecting major currency pairs. Below consensus PMI readings from the UK combined with news on Brexit are pushing the pound lower. Moody's positively about the Polish economy. The EUR/PLN close to the 4.25 level.

The most important macro data (CET - Central European Time). Surveys of the macro data are based on information from Bloomberg unless noted otherwise.

• No macroeconomic data which may significantly affect the analysed currencies

Lots of news on Friday

Below expectations payrolls growth in the US, higher than estimated unemployment rate and lower wage gains pushed the dollar briefly lower on Friday afternoon. The EUR/USD rose above 1.1950 but quickly returned below 1.1900 value. The main reason behind the sudden reversal was news from Bloomberg concerning future actions from the ECB.

The agency, citing its sources, claimed that the ECB might not be ready to announce next year plan to taper QE before the December central bank meeting. So far market participants expected that the asset program reduction schedule might be announced in at the end of October. This date was picked by 65% economists surveyed by Bloomberg between August 28-31.

Theoretically, such change should not have a significant effect because new data does not contradict to earlier suggestions that the program will be winded down from January 2018. On the other hand lack of announcing message earlier my suggest that the EBC is concerned by the rising euro. Longer waiting period also increases the odds that the QE tapering deviated by new news (inflation) which finally the widening down process may take more time and therefore keep the monetary policy more benign. On volatile market

The negative sentiment to the main currency pair was also supported by robust ISM publication. The manufacturing index rose to 58.8 points level which was also the highest publication in more than six years. It is also worth noting that employment sub index increased to 59.9 level. Both indicators rarely topped 60 value. Moreover Friday's payrolls, despite its overall weakness, showed a significant increase in employment for manufacturing. The production jobs rose 36k with large upward revision for July. Monthly manufacturing payroll has not risen by 40k in almost 20 years.

Geopolitics and readings from the UK.

Today, taking account the sum of news on Friday, some dollar strength should be visible on the market. During the weekend, however, more tensions were seen on the Korean Peninsula what pushed the Japanese yen to the greenback higher. The euro, which has been lately regarded as a semi-haven currency, is also stronger today. As a result, the EUR/USD returned above 1.1900.

Some weakness is seen on the pound. Partly it is the effect of the weekend article from "The Sunday Times." The paper indicated that the Brexit-bill might top 50 billion pounds if the transitional divorce period lasts to 2022. These reports were quickly rejected by Brexit secretary David Davis. He called them "nonsense" in the BBC interview.

The pound was also under pressure from construction PMI readings. The index dropped to the lowest level in a year (51.1 vs 52 points in a survey). Employment component slided to June 2016 lows while the decrease of commercial construction was the fastest since July 2016. Finally, the EUR/GBP returned to 0.92 level. The pound is also significantly weaker to the zloty. The UK currency is mainly under pressure due to incoherent reports on Brexit and mixed data from the economy which hinder the BoE job on future monetary policy. These issues will probably remain unresolved in the following weeks so that the pound may stay under pressure either.

Positive message on the Polish economy from Moody's. The zloty is slightly stronger.

First hours of the European session brought some slight selling pressure on the zloty. The EUR/PLN topped 4.2650 level. Depreciation move was stopped by somewhat weaker dollar, and the later report from Moody's pushed the Polish currency higher.

The rating agency claims in a message cited by PAP that "Higher economic growth and strong budget execution significantly increase the chance that Poland's 2017 fiscal deficit will be well below the 3% Maastricht-threshold for a third consecutive year." Moody's also forecast that Poland will grow by 4.3% this year while the fiscal deficit will be at 2.5% of GDP.

The Polish rating review is also scheduled for Friday by Moody's. Today's report, however, increases the odds that the overall view may be quite positive on the Polish economy and therefore is also a good news from the zloty. The rest of the day should be fairly calm on the PLN as the macro calendar is empty and US markets are closed for the Labour Day.