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Daily analysis 05.02.2016

5 Feb 2016 13:10|Marcin Lipka

Considering the recent nervousness on the market, today's publication may cause a bigger nervousness than usually. Strong changes on the dollar are possible during the payrolls. In January, the Polish currency reserves might increase their 5-year minimums. Goldman Sachs about the zloty.

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

  • 14.00: Poland's official currency reserves (the latest reading 94.9 billion USD).
  • 14.30: Situation on the American labour market in January. New workplaces in non-agricultural sector (estimations: +190k). Unemployment level (estimations: 5.0%). A change in a level of hourly wages (estimations: +0.3% m/m and +2.2% y/y).

Labour market in the centre of attention

As always, the first Friday of the month is dominated by the publications from the American Labour Department. So called payrolls, which are the new workplaces in non-agricultural sector, are a basic index of the employment's condition in the USA. It will be also carefully analysed in the context of the global economy and the perspectives of future interest rates in the United States.

Specific value of the payrolls will be the first element that the market will focus on. If they exceed the consensus (190k) by more than 50k, and additionally the reviews for the past two months are negative, we can expect a visible appreciation on the American currency. It probably will be fuelled by the fact that apart from the Wednesday's ADP reading other indexes from the labour market were below expectations in the past few weeks.

On Thursday, the market received slightly weaker publications about jobless claims. Additionally, this month the employment subindexes in the ISM readings for services reached their one-year minimums. As for the same readings for industry, they were the lowest since 2009. However, this data is already known. If the payrolls deny the signs from the accelerating indexes, the condition of the dollar could significantly improve. It could also increase the expectations regarding this year's hikes.

On the other hand, if the payrolls are clearly disappointing (the publication will be clearly below 150k), and additionally the data for the past two months is reviewed downwards by at least 50k, this would mean that the anxieties of the state of the American economy are becoming true. This could cause the American currency to weaken even more, and increase the risk concerning the GDP growth not only in the USA, but also the world.

However, if the reading is relatively close to the consensus, the market will focus on an increase in salaries. The higher from the expected 2.2% y/y it gets, the bigger chance for appreciation of the American currency. On the other hand, if an increase in hourly wage is smaller, it would be a negative sign for the American currency not only in economic context, but also the perspective of inflation (also the base case inflation).

In the end, it is also worth noting the official level of unemployment. Even though it is not crucial for the final interpretation of the American data, a decrease of this index below 5.0% could be received as positive. That is of course, if it appears that the other crucial figures are close to the consensus.

Considering the available data (especially the ADP publication) the payrolls reading should be close to expectations. However, a specific character of the Labour Department data (surveys, publications' reviews) significantly increases the risk of deflection of actual data from estimations. The publication's error could be also increased by a few-days blizzard in the East Coast of the USA, and a relatively long period of good weather at the beginning of the Winter. It caused, among others, a steady increase in workplaces in the construction sector already in December. Now these workplaces might be reviewed downwards.

The zloty is also under NFP influence. Goldman Sachs about the PLN

The American publications should have an impact also on the zloty. The USD/PLN pair will be sensitive to the readings from the United States to a significant degree. If the data is much better than expected, it is possible that the pair would return to the area of 4.00. On the other hand, if the publications of every crucial indexes of the American labour market are very weak, it could go down even below 3.90.

This afternoon, we should also focus on the NBP data concerning the Polish currency reserves. In December, they reached the lowest levels for 5 years, and were worth less than 95 billion USD (a dercrease by 6 billion USD in the past two months). This could partly be a result of the capital's outflow from Poland, but also the differences in evaluation of assets supported by the central bank (value of bonds and price of currencies in which the bonds are denominated). However, it there is another visible depreciation in the reserves, this element may also be denied by the market's participants.

Before noon, the Bloomberg agency published the opinion of the Goldman Sachs (GS) about the Polish zloty. According to the GS, a wear off on the PLN “seems exaggerated, considering the general good macroeconomic situation, low internal unbalance, a careful tone of the current and future members of the MPC, withdrawal from the recent ideas of converting the currency loans, and calm monetary conditions in Europe”.

However, the bank says that “the uncertainty regarding the macroeconomic and fiscal policy, and other plans regarding the conversion of currency loans will remain”. Further on the SG also estimates that “the zloty and the Polish rates will be more sensitive to the changes in the global sentiment than it was in the past, and they may be a beneficiary of external easing to a lesser degree than other markets in the region”.

5 Feb 2016 13:10|Marcin Lipka

This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without acknowledgement of the source is prohibited.

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