US Job Market Shows Slight Improvement, While Stable Inflation Boosts Hungary’s Forint

This week, data from the US labor market turned out to be better than expected, although it’s still hard to call them good. In Europe, inflation is strengthening the forint. Remaining price increases readings – no surprises.

Better data from the US job market

After last week’s surprise from the US job market, the markets were more than usually waiting for Thursday’s data. It is on this day that the number of unemployment benefit applications is published. 233,000 is not a very bad result, but it’s also hard to call it good. It is worth noting that after last week’s correction, it was exactly 250,000. Analysts expected a drop, but smaller. The 233,000 level does not suggest that the job market overseas is doing great. It’s just not as bad as it might seem. It is also worth noting that the total number of people employed did not decrease in July, but increased. However, remember that the population in the US is constantly growing, so without corresponding employment growth, unemployment will increase, despite the growth in employment. How did the markets react? Yesterday’s data caused the dollar to strengthen against the euro. However, the initial move was overly optimistic and was quickly corrected to a large extent.

Inflation in Hungary

Hungary deserved special attention yesterday. This country has stifled inflation to around 4% since January, and since then the data have looked almost as if they were centrally administered. Over 7 months, the inflation rate fluctuated between 3.7% and 4.1% (the latter figure is the data published yesterday). On the one hand, this is a result 0.1% above expectations. On the other hand, however, it should be remembered that Hungary is currently in the midst of a strong cycle of interest rate cuts. Therefore, keeping inflation at a reasonably stable level evidences the effectiveness of this approach. However, rising inflation has led investors to expect a slowdown in the pace of interest rate cuts. This in turn has strengthened the forint’s exchange rate against other currencies.

No inflation surprises in Europe

Today we learned a series of price growth readings in several European countries. It started with no surprises in Norway. A 3.3% price increase was expected and that’s exactly what was received. Therefore, it didn’t have much of an impact on the Norwegian krone. Germany also showed stable data. 2.3% was expected and 2.3% appeared. Similarly in Italy – the result was identical to expectations, i.e. 1.3%. The problem of price increases is slowly decreasing and neither after the data from Germany nor Italy was there a reaction in the currency markets.

Today in the macroeconomic data calendar, worth paying attention to:
14:30 – Canada – Job market situation.

Maciej Przygórzewski – Chief Analyst at InternetowyKantor.pl