The market prepares for today's data from the American labour market. Publications from Germany appeared to be worse again. The zloty remains relatively stable within the area of 4.25 per euro. Greater variability is expected on the USD/PLN and the GBP/PLN.
Most important macro data (CET – Central European Time). Estimations of macro data are based on Bloomberg information, unless marked otherwise.
- 14.30: Data from the American labour market: new jobs in the non-agricultural sector (estimations: +185k, range of majority estimations is between 135k and 238k); unemployment rate (estimations: 5.0%); a change in hourly salaries (estimations: +2.3% y/y).
Payrolls at the centre of attention
Investors are waiting for the most significant data this month – new jobs in the non-agricultural sector published by the American Labour Department. However, it is worth noting its current, asymmetrical character. The probability of hikes in the United States should only be slightly decreased due to a weaker publication. On the other hand, slightly better data from the USA (within the limits of 200k by consensus on the level of 185k) should cause a continuation in appreciation of the USD.
This approach is a result of one basic fact – the American economy is practically at the point of full employment. Thus, it is impossible to constantly create 200k new workplaces. Such an increase in workplaces in the non-agricultural sector, causes a decrease in the unemployment level by more or less 0.8 points each year. According to the calculator prepared by the Federal Reserve from Atlanta, it takes approximately 110k workplaces, in order to keep a steady level of unemployment.
Members of the Federal Reserve speak of the same thing. Yesterday, in his interview with the Reuters Agency, James Bullard said that in his opinion 100k-125k workplaces per month would be enough, considering the demographic increase and the economic trend.
Thus, it is possible that if the payrolls reading is higher than 200k, and combined with even a slight upwards data review (approximately 30k), we can see a quick test of the level of 1.0800 on the EUR/USD. This can happen, if the other factors are close to the consensus (unemployment rate 5.0 and an increase in salaries on the level of 2.3% y/y). A similar reaction would probably be observed on the debt market. The profitability of two-year treasury bonds could land above 0.85% and a chance for a hike in the USA would become higher than 60%.
A publication above 150k (which is slightly less than the consensus assumes) could cause the market to focus on different matters, especially on the increase in salaries. If it is faster than expectations, the dollar could become a beneficiary of these readings.
Also, in the case of a lack of clear signals from the payrolls, investors may take note of the unemployment rate. Economists surveyed by the Bloomberg agency are split when it comes to October's reading of this index. 42 out of 84 economists claim that it will drop to the level of 5.0% and 37 of them think that it will remain on the level of 5.1. Thus, a reading which is coherent with the consensus should be positive for the dollar.
The market may interpret this data in a negative way, but only if the amount of new workplaces is less than 150k. This amount should relate to a downward review of the past two months by more than 30k. Additionally, if it overlaps with a lower increase in salaries, there will be a chance for even a 100 pbs work off on the EUR/USD.
On the other hand, it is worth noticing that there is a relatively small chance for the negative scenario to work out. Especially considering Wednesday's ADP readings and the strong subindex of employment in the service ISM.
Few words about the foreign market
Today, just like yesterday, the market received significantly worse publications from Germany. The German industrial production increased by only 0.2% y/y, while the expectations were within the limits of +1.3 y/y, and last month's increase was +2.7% y/y. This situation can also extend to the other eurozone countries, which are dependant on the export of industrial products. As Thursday's data regarding orders showed, the weakness can be seen mainly outside the eurozone. This may also be one of the arguments for the EBC, to ease the monetary policy, which would mean further depreciation pressure on the EUR/USD.
Summarising the anticipated publication from the USA, it is worth noting that there is a bigger chance for keeping the American dollar's strength. On the other hand, if investors are as negatively surprised as last month, the work off on the EUR/USD could even be more than 100 pbs.
Zloty before the data from the USA
The reading from the United States may also have a certain impact on the market of the zloty. However, considering the perspective of the monetary tightening in the USA, one should notice that this fact can bring the EUR/USD lower. Additionally, the anticipation for monetary easing in the eurozone is advantageous for such currencies as the zloty. Thus, the EUR/PLN should be relatively stable in this scenario. Therefore, today's payrolls should not clearly disturb the evaluation of the euro expressed in the national currency.
We can expect more variabilities on the American dollar. A better publication on the other side of the ocean, is a chance for the USD/PLN to enter the range of 3.93-3.94. On the other hand, weaker data, especially a negative surprise like the one from the past month, could take the dollar into the range of 3.86-3.87. If the data from the USA are good, the franc could also increase. Even though, the CHF/PLN will not go above the level of 3.95. In the end, it is worth remembering about the possible presentation of a candidate for the new minister of finance. The more well-known this person is to the market, the higher the chance for an improvement on the PLN.
Anticipated levels of PLN according to the EUR/USD rate:
Anticipated GBP/PLN levels according to the GBP/USD rate: