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Afternoon analysis 08.07.2016

, author:

Marcin Lipka

The amount of new workplaces in the non-agricultural sector is definitely higher than the market consensus. However, component of the salaries growth was weaker and unemployment rate increased. The zloty gained slightly against the euro, as well as the franc. The dollar is near the 4.00 level.

Equalization of the May disturbance

We took note that the weak readings from the American labor market in May, were just a statistical disturbance. They were caused by a rather small sample group, used by the American Labor Department to estimate changes in employment for the entire population.

A slowdown in creating new workplaces was not indicated by the ADP data (it examines new workplaces in the private sector and it is obtained with the use of significantly larger sample group). The May reading, as well as the June reading that was published yesterday, were near the recent median within the range of 150-170k. Apart from this, jobless claims were low, the ISM employment components was positive and the job offers amount was high.

As a result, a reading at the 287k level was not that surprising. This is because it just equalizes the last month disturbance, as well as returns to the 150k value from the past few months. This should decrease anxieties of some of the market participants who claimed that the recent data may suggest the market slowdown.

However, the data about the salaries growth was disappointing. It was only a positive 2.6% y/y against the expected positive 2.7%. In the month on month relation the growth was at a positive 0.1% level against the expected positive 0.2% level. This probably caused a rapid work-off on the EUR/USD to the 1.10 area.

It is also worth noting that the last months decrease in unemployment level, has been corrected in this report as well. The unemployment level measurement is based on different surveys than payrolls are. Last month it decreased due to the fact that a significant amount of people stopped looking for a job. This means that they were no longer included in the workforce. This statistical disturbance has been currently corrected as well. The unemployment rate returned to the 4.9% level. This had a neutral impact on tone of the data.

In conclusion, we may say that we are returning to the same state from before the May data. The labor market is in a positive condition, the salaries could grow faster, but the market is slowly tightening and the economy is near the full employment. This should slowly raise the chances for rate hikes this year, especially if the Brexit consequences in the USA are mild, or even unnoticeable.

Data slightly strengthened the zloty

The Polish currency gained slightly due to the data from the American labor market. It denies the slowdown in the USA, as well as sustain the perspective of a mild monetary policy due to a slower increase in salaries. At approximately 16:00 (4:00 PM), the EUR/PLN was near the 4.41 level and the franc was at the 4.06 level.

Publication from the United States also sustains our previous standpoint that the following weeks may be relatively favorable for the emerging markets currencies, including the zloty. This may cause the EUR/PLN to go to the area of 4.35. This is of course, if we don't receive any negative information. However, the break of Summer and Autumn may be much more difficult for the zloty. This is the time in which Brexit may reflect in hard data. We will observe the negotiations between London and Brussels. Moreover, the Fed may start suggesting rate hikes more firmly.


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.

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