Data from the USA with limited impact? (Daily analysis 6.09.2019)

Orders in German industry, as well as production, fell sharply in July. Important data from the USA, which, however, can have a limited impact on the dollar and the global market. The zloty remains stable against the dollar and the euro. The franc moves away from 4.00 PLN due to positive global sentiment.

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

• 2:30 p.m.: The US labour market situation in August, according to data from the Department of Labor. New payrolls in the non-farm sector (estimates: 160k). Unemployment rate (estimates: 3.7%). Change in average wage (+3.0% year-on-year).

No positive data from Germany

Yesterday we highlighted the very weak data on industrial orders in Germany for July. Today, Destatis's readings have confirmed that industrial production in Germany has also declined very severely. The decline was 4.2% year-on-year and was the ninth consecutive decrease in monthly production in annual terms.

The production shows a collapse in industry. The 12-month average industrial production is currently at minus 2.3% year-on-year, which is lower than in the worst point of the eurozone crisis in 2012-2013. In the last 30 years (after the reunification of Germany), the pace of decline in production was deeper only during the great financial crisis of 2008-2009 and slightly higher during the global recession following the online bubble of the turn of the millennium.

It is also worth noting that, excluding construction, industrial production together with the mining sector are at a lower level (by 0.5%, seasonally-adjusted) than it was the case in the monthly average in 2015. This is a result of many factors (e.g. the still weak condition of the automotive sector), but probably the greatest impact results from lower external demand for German production, which is a consequence of, among others, the trade war causing fears about investments in Asia. Similar conclusions can be drawn from other readings from Germany - PMI or Ifo.

Data from the USA, but are they crucial?

In the first Friday of the month, investors await the Labor Department's data on employment, unemployment and changes in average wages in the USA. This time, however, the data may be relatively neutral for the market, even if they are relatively far from the consensus. Why?

A series of good ISM and ADP readings was published.

Due to its much larger sample volume, ADP is more reliable than the Department of Labor's readings on changes in the number of payrolls in the private sector. Although the market is more responsive to BLS data if they are not particularly weak (below 100k), investors will believe that the economy is still creating enough jobs to maintain the current pace of growth. On the other hand, fantastic data (clearly above 200k of new payrolls) may be perceived as a one-off, statistical disorder.

There is little chance that the unemployment rate will evoke more emotions, as it will probably remain close to the 3.7% limit. Also in the context of wage growth, if the rate starts with three (3% or slightly more in year-on-year terms), the data will also be perceived as relatively neutral and increase the probability of cutting interest rates by 25 basis points at Fed's a meeting in less than two weeks' time. They will reduce the possibility of adopting a deeper monetary easing that would trigger the risk of a deeper appreciation of the dollar. As a result, the US readings would have to surprise very seriously if Friday's quotations were to end at levels that are noticeably different from the current ones.

Zloty is stable

Positive trends on the broader market related to the return to trade talks between the USA and China, strengthening of the yuan or improvement of Latin American currencies' situation are also favourable for the zloty. If the readings from the United States are not a dramatic surprise, one can expect that the zloty will remain stable, i.e. the franc will remain below 4.00 PLN, and the euro or the dollar will not exceed 4.35 PLN and 3.95 PLN respectively.