Afternoon analysis 02.09.2016:
The American data appeared to be weaker than expected. However, the appetite for the dollar's wear-off remains limited for the time being. The zloty benefits from worse readings from the American Labor Department. The EUR/PLN is withdrawing from the area of 4.39 to 4.36.
Data basically excludes September
Data from the American Labor market from this afternoon, is probably a negative thing for supporters of rate hikes in September. The amount of new workplaces in non-agricultural sector increased by 151k, against the estimated 180k. This data is not negative, but other elements from the BLS report do not suggest the necessity of a rapid monetary tightening.
Unemployment rate remained at the level of 4.9%, instead of going 0.1 percentage point lower. The relation of employed and those who seek job against the amount of people in working age, has also remained at an unchanged level. However, the average length of working week has decreased. In August, it was at the level of 34.3 hours, after a decline by 0.2 hours. This may mean that there is no strong demand for job among the currently employed.
Salaries are the weakest component of the entire report. They only increased 2.4% y/y, instead of the expected 2.5% y/y. This is the worst reading since March. Apart from a lower consuption, lower salaries may also mean a lower inflation pressure. This, on the other hand, should cause the FOMC appetite for rate hikes to become limited.
In our opinion, today's data shows that the probability of rate hikes in September is very limited. Therefore, we may expect the Fed to suggest only one hike for this year. The market will begin to dispose itself for December. We also think that this is the first real date for rate hikes for the time being.
In this case, the dollar should give away a portion of its recent gains. However, the ISM from services sector scheduled for the next Tuesday, will also be significant. We should not expect as fatal reading as it was in the case of industrial ISM. However, a clear increase in services sector recently may slightly withhold. This should be a negative information for the dollar as well.
Rebound on zloty
Just before the data from the American labor market, the EUR/PLN has tested the area of 4.39. This is a high value, taking into consideration the global, as well as the local situation. In today's Daily analysis, we have announced that the overvalue is slightly exaggerated. Moreover, we have taken note that the foreign currencies should lose value, if the American data isn't very positive.
At approximately 16.00 (4.00 PM), the euro was close to the 4.36 level, and the dollar returned below the 3.90 level. Depreciation of the EUR/PLN is not the base case scenario for the time being. However, taking into consideration that the dollar may continue to lose, we may pay 0.02-0.03 PLN less in the coming days. Further growths on the PLN are possible, if Moody's leaves Poland's rating at an unchanged level next Friday.
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