Daily analysis 13.01.2014

Significantly lower than expected number of working places outside agricultural sector, has overestimated the dollar. Where do such significant differences between the ADP report, NFP and unemployment rate come from? Changes in Federal Reserve. Zloty clearly gained thanks to the data from USA, but today the part of this movement is corrected.

Most important macro data (CET). Estimations for macro data are based on Bloomberg's information, unless marked otherwise.

No macro data that could significantly influence analyzed currency pairs.

Less working places but unemployment decreases. Changes in Fed

As usually in the beginning of the month, the participants of currency market awaited the data from American labour market. After good readings from ADP majority was expecting the report in areas of 200 thousands, and some investment banks have corrected their predictions to higher during previous days. So when the number 74 thousands appeared on terminals' screens, it had to cause quite a fuss on the market. Second surprising information was a clear decrease of unemployment rate (from 7.0% to 6.7% by the consensus on level of 7.0%). How was it possible that less working places appeared, but despite that the unemployment decreased?

First of all the monthly report of United States Department of Labour is a survey made on two separate sample groups. New working places are made on the basis of surveys sent to the companies and the unemployment rate is based on data gained directly from the households. In longer time period these data overlap with each other, but in case of individual monthly reports the differences can be significant. The decrease of unemployment rate was caused equally by increase of number of employed (according to the households' survey over 140 thousands), and decrease of number of people qualified as a labour force (about 350 thousands less – half of these people quit seeking job and the rest are for example new pensioners. As a result the number of unemployed decreased by 490 thousands (it is now 10.4 million), which caused such a significant decrease of unemployment level (by 0.3%, from 7.0% to 6.7%). The low growth of NFP is much harder to explain. Some commentators stated that it was caused by the weather. It is worthy to notice that the informations gathered for December report from the labour market, come from the week containing the 12th day of given month and severe frosts reached USA at the beginning of January (so they could negatively influence January's readings). This missunderstanding can come from a fact, thet Department of Labour mentioned in the published report (http://www.bls.gov/news.release/pdf/empsit.pdf ) about the weather effect. This note concerned only the people hired in building trade. Their number decreased by 16 thousands while the average from last 12 months showed the increase by 10 thousands. Weather effect concerned only “part of the country” and it could not be compared to January's records of coldness. As a result when we will consider the report of United States Department of Labour and the households' surveys published by Department of Labour we can assume that the weak readings of NFP was caused by statistic disorders (which took place in the past), and not the labour market's breakdown. Is this concept true? We will find out during the upcoming months.

Before the weekend president Obama nominated 3 persons to the seven piece Board of Governors at Federal Reserve (before they will assume their office they still need the approval of Senate). Two of them are new names in Fed – Stanley Fischer and Lael Brainard, and the third nomination was again Jerome Powell. Fischer is a former president of Bank of Israel, who can be described as a neutral representative of Central Bank (he is neither dove or hawk; more about this person in the comment from September - https://cinkciarz.pl/nowosci/komentarze-walutowe/komentarz-walutowy-z-25-09-2013 and December - https://cinkciarz.pl/nowosci/komentarze-walutowe/komentarz-walutowy-z-12-12-2013 ). There are much less informations about Brainard's views on monetary policy. She used to work as state's under-secretary in the Department of Treasury and as Reuters claims, she will concentrate on the employment increase (which can be a tip that she will represent the dove views).

In conclusion, independently from the reasons of NFP's lower readings, Friday's data can cause decrease pressure on dollar for a longer time (perhaps even until the January's summit of Federal Reserve). It is hard to expect that after on worse reading, Fed would block the coming out of amount loosening (although such speculations will appear on the market all the time). The basis scenario for EUR/USD for the next hours is movement in the middle boarders of 1.36 level.

Zloty takes advantage of the better sentiment

Worse data from the American labour market had a possitive influence on zloty. The national currency carried by the wave of global growth for appetite for risk, has enforced itself in relation to euro by about 0.5%, and in relation to dollar by even more that 1%. Other EM currencies have also increased their value (Mexican peso, Hungarian forint and South African rand), but their appreciation was not so stron as on PLN. Rand for example managed to lose the majority of what it gained in Friday. Last days confirm that zloty is in EM's market forefront – in the time of worse sentiment it weakens slowly and in case when data is positive for it, its value grows fast.

This day on the market should be calm. Lack of macro data and natural moods' calming down after Friday's fuss should result in stable rate of exchange for EUR/PLN (in areas of 4.15).

Expected divisions of zloty pairs determined by EUR/USD rate:

Expected levels of GBP/PLN rate determined by GBP/USD: