News

Afternoon analysis 02.03.2016

, author:

Marcin Lipka

The ADP report on employment pushed the dollar slightly higher. John Williams on the solid condition of the US economy in an interview for the Financial Times. The zloty remains fairly stable during afternoon trading.

According to the ADP report, the US economy created 214k jobs in February. It was 24k above the expectations of the economists surveyed by Bloomberg. The solid message from the publication was slightly lessened by a 12k downward revision for January. Overall however, the creation of jobs in the US at around 200k per month should be regarded as a positive message, especially noting that the economy is close to full employment.

Can we conclude, therefore, that Friday's “payrolls” published by the Labour Department may also hit the 200k mark? Theoretically, in the long run both readings move close to each other. Its 6-month moving average in January was 212k for the NFP and 204k for the ADP. On the other hand, it is not hard to find a month when the difference was meaningful. In October 2015, the “payrolls” jumped above 300k while the ADP published only 178k number.

We can however conclude, that if NFP turns out to be around 200k, the market should regard this message as dollar positive. Additionally, if no major news hits the wires until the end of the week, it should also push the EUR/USD below 1.0800 mark.

Bullish attitude of Williams regarding US economy. Stable zloty

The recent comments from FOMC members have noted possible threats for the US economy and especially a slower than previously expected inflation rise toward the central bank target. A much more optimistic signal comes today from an interview with John Williams, published at Financial Times website. The San Francisco Fed's president, who is regarded as a key figure in the FOMC, notes a mainly bullish view for the US economy.

Williams claims that the unemployment fall to 4.5% at the end of the previous year, “the domestic inflation pressure strengthens.” The Fed's member also believes that, “positive domestic demand in the US was outweighing weakness from abroad.” The FT also quotes an interesting comparison from Williams. He argued that, “worries about an impending recession or financial crash circulating in Wall Street were misguided, in much the same way that economists had been wrongly convinced back in 2006 on the eve of the subprime implosion that the US economy was robust.”

The primary question is whether Williams’ views are shared by Janet Yellen and Stanley Fischer, the Fed's vice chairman, or whether Yellen is closer to the opinions presented by Brainard, Bullard, and Dudley. The answer for this problem should be clear as early as mid-March. If Yellen is closer to the optimistic camp, the interest rate hike scenario in the first half of the year should return to the discussion. As a result, the USD may strengthen markedly as early as in late-March.

Regarding the Polish zloty, the afternoon trading should be fairly stable. The movements in the mid 4.30-4.35 range on the EUR/PLN are a baseline scenario at this moment. This view can be disturbed by some global sentiment deterioration, which however, considering solid publications from the US, should not take place.


This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without the written permission from Cinkciarz.pl Sp. z o.o is prohibited.

Return to the main list


See also: