Set of positive data from the USA (Afternoon analysis 5.09.2019)

Very good readings came from the US economy. Strong employment growth according to ADP and surprisingly high ISM readings from outside the industrial sector. Along with announcements of reopening trade talks, this is a strong positive factor for risky assets and helps the zloty to maintain its recent increases.

The US economy received a strong boost from the positive data for August.

Employment high in green and solid ISM reading

Despite fears about the condition of the labour market and services sector (e.g. after weak industry data or a worsening sentiment due to the growing trade war), companies across the pond continue to increase employment and the services sector in the USA is performing exceptionally well.

ADP data, which we think provide a better overview of the employment situation than the Department of Labor's official readings, show that the strong employment growth in the United States took place in August. The number of new payrolls increased by 195k, i.e. by about 50k more than expected by economists surveyed by Bloomberg. This is also the best reading since April this year.

Sceptics would quickly find in the ADP data that relatively few payrolls were created in the manufacturing and construction sectors (a total of 11k). However, the increase in the number of payrolls was relatively large, both in terms of industry and company size. More than 140k jobs were created in small and medium-sized companies (in the USA up to 500 employees), which means that not only large corporations but also family businesses continue the trend of employment growth.

The second good news was a positive ISM index reading from the services sector. This connects even naturally with ADP data. It reached 56.4 pts, i.e. about 2 pts above the forecasts and well above the 50 pts barrier separating development from contraction. What is particularly encouraging is that two of the three key sub-indexes - business activity/production and new orders - rose above 60 points.

What is the impact of these data on the currency market? Overall, they are positive for the dollar, which has been shown in recent hours. This is because such strong readings reduce the chance of more than 25 basis points of interest rate cuts at the September Fed meeting. On the other hand, the dollar may be weakened by the fact that the good condition of the USA is also an optimistic indicator of the situation in emerging markets. Combining this with information on plans to return to the US and Chinese trade talks, the positive effect on the dollar is relatively limited.

Stable zloty

Good data from the US economy, together with reports of a possible improvement in relations between Beijing and Washington, mean that the zloty is maintaining most of the recent increases. The next few hours should not change this trend. Therefore, the EUR/PLN exchange rate will probably remain slightly below the 4.35 boundary and the dollar will be quoted slightly above 3.90 PLN. Good global sentiment and weak data from Switzerland (we wrote about them in the previous commentary) allow for strong declines in the franc. During evening trading, the CHF/PLN exchange rate is quoted at approx. 3.98 PLN.