In the US, there are still several million jobs missing (Afternoon analysis 5.08.2020)

In July, 167k payrolls were added in the USA. However, this seems a ridiculously small number at the loss of over 19 million in April. There is still no demand for the US currency: one euro costs over 1.19 USD again. The USD/PLN exchange rate is just over 3.70.

Millions were expected, and there were just thousands. Expectations did not meet the reality

In the afternoon, the dollar's weakening continued. After the session started on the New York Stock Exchange, the EUR/USD exchange rate rose again slightly above 1.19 (previously it happened on Friday). This is the upper limit of the dollar's weakness against the euro since May 2018.

Today, data from the US labour market were published. According to the ADP institute, the increase in employment in the US non-farm sector amounted to 167k payrolls in July. This is slightly over a million below market expectations, but in turn, the June data were revised upwards by about 2 million.

Although investors await Friday's official data from the Labor Department, the ADP report may indicate what to expect, even though the two publications are not perfectly correlated. The deep problems that the US labour market continues to face can be seen when looking at previous months. In March, 19.4 million jobs were lost, and from April to the end of July only 7.9 million were added.

Part of this concerns temporary redundancies, but company bankruptcies and the termination of some aid programmes may turn temporary into permanent ones. In order to counteract this, the US Congress is trying to work out a fiscal package, which, however, is prolonged due to differences between the views of Democrats and Republicans amounting to several trillion.

The difference in PMI illustrates the dollar's weakness

Meanwhile, the situation in the US is bad, clearly worse than in Europe, as recent macro data show. While today's published final readings of PMI economic activity growth indexes in the eurozone in July show over two-year highs, entering the expansion phase (54.9 points), analogous data from the USA show a much slower pace of economic activity growth.

According to IHS Markit, the aggregate PMI index for the USA in July, for industry and services together, was 50 points. This is slightly (0.4 pts.) more than the initial estimates, but this is exactly the line separating recession from growth. The clear imbalance between the paths of recovery in Europe and the US is largely responsible for the depreciation of the dollar in recent weeks.

Like the majority of currencies, the zloty also benefits from the dollar's weakness. The USD/PLN exchange rate fluctuates around 3.70 in the afternoon, i.e. the lower boundary since October 2018. In turn, the EUR/PLN exchange rate remains unchanged at around 4.39-4.40.

Tomorrow, the Bank of England will issue a statement after the meeting. Although no changes in the most important aspects of monetary policy are expected, the UK central bank may provide the basis for their modification at subsequent meetings, leading to a potential increase in pound fluctuations around the publication. The GBP/PLN was quoted at around 4.86 this afternoon, the lower level of the last week.