Daily analysis 06.10.2016

The American data was positive, but reaction of currencies was quite dimmed. Investors will focus on salaries regarding the American labor market report. The zloty remains stable against the euro after the MPC press conference yesterday.

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

• 14.30: Weekly jobless claims from the USA (estimations: 255k).

Relatively dimmed reaction

The American macro data from Wednesday seemed quite positive. However, this didn’t cause a clear appreciation of the dollar. The EUR/USD remains near the level of 1.1200. If tomorrow’s report from the American labor market is positive, it may translate to a significant appreciation of the dollar.

When it comes to yesterday’s ADP report, a result at the level of 154k is to be considered as positive, despite a slight decrease in new workplaces in the private sector. Estimations from the Federal Reserve show that approximately 100k new workplaces per month is a sufficient amount to maintain the unemployment level. If there is more workplaces, unemployment would decrease in the long-term.

Mark Zandi, chief economist of Moody’s Analytics (which prepared Wednesday’s data together with the ADP), was also positive about the data. He claimed that, “job offers at their historical maximum, as well as the level of dismissals near its minimum, show that the labor market is blooming.” Moreover, a minor slowdown in creating new workplaces is a result of the return to the full-employment economy, in Zandi’s opinion.

Tomorrow’s ISM index for services brings even more positive conclusions. The anxieties (also from our side) that last month’s reading may be the beginning of the end of positive tendencies in the American economy. The ISM index increased to its highest level since October 2015 and reached 57.1 points (51.4 points in August). There was a strong increase in basic components, such as business activity and new orders. Both of them exceeded 60 points. The employment subindex increased clearly as well, by reaching the level of 57.2 points.

Data regarding increase in salaries

Tomorrow’s data from the Labor Department is significant, but not only regarding new workplaces in non-agricultural sector. If the data is within the range of 150k-200k, investors will immediately focus on the pace of salaries growth.

Higher salaries (consensus: 2.6% y/y) would not only help inflation to reach its 2% target, but also show that the labor market is actually near full employment. This would be a good argument for the Federal Reserve to prepare the market for rate hikes in December.

Moreover, investors would relate the recent positive ISM readings with an increasingly positive labor market. This combination should cause an increase in profitability of the American debt, as well as become an argument for appreciation of the USD. If salaries growth is at least 0.1 percentage points higher than the consensus (2.7% y/y) and other data from the Labor Department is near expectations, the EUR/USD may even decrease by 100 pbs.

Calm zloty

The MPC press conference was yet again relatively hawkish. Chairman Glapiński suggested that the Council will change its attitude towards monetary policy to more restrictive next year. Moreover, he said that rate hikes would most likely occur at the beginning of 2018. This message is consistent with the announcement from last month and it should contribute in stabilization of the zloty against the euro.

On the other hand, tomorrow’s data from the USA may slightly harm the zloty, if salaries growth is higher than expected and other data from the Labor Department report is at least consistent with the consensus. This could move quotations to the range of 3.87-3.88 PLN. Moreover, the euro may cost 0.01 PLN more.