The latest data from the US labor market turned out to be much better than forecasts, which resulted in a strengthening of the US dollar. This hit the Polish złoty, which does not fare well against a strong dollar. The strong position of the “greenback” is not damaged by subsequent weak readings from Germany.
Strength of the American job market
Friday’s data from the United States provided a definitive answer to the question about the November reduction of money cost in the US. The drop in unemployment to 4.1%, the increase in employment in the non-farm sector by 254 thousand (with a forecast at 140 thousand) and a simultaneous jump by 223 thousand in the private sector (forecast 112 thousand) confirmed the strength of the US economy. Results were better than anticipated, supporting the narrative of Powell, who mentioned last week the lack of need for double cuts (50 p.b.) at the last two FED meetings in 2024. Right after Friday’s publication the dollar strengthened in the market. The EUR/USD exchange rate fell from 1.10 USD to 1.096 USD. A strong move was also seen on USD/PLN rates, which reached a level of 3.94 PLN. Just a week earlier they were hovering at 3.80 PLN. New data brought back a narrative of a so-called soft landing of the US economy. It’s worth adding, that future FOMC decision forecasts have also changed significantly. According to the FedWatch Tool, the probability of a November cut by 25 p.b. is already 93%. There is no option for 50 p.b., and there have even been voices – 7% – suggesting a decision to leave the money cost at the current level.
Worse in Germany
Good data from the US overshadows the lackluster macroeconomic readings from our western border. On Monday we got to know again poor results from Germany. Industrial orders on a monthly basis fell by 5.8%, with a forecast of -2%. On an annual basis it was -3.9% (seasonally adjusted) and -6.7% (unadjusted). On Monday, the Sentix index, reflecting investor expectations in the Eurozone, also underperformed, which despite a rise from -15.4 pts. to -13.8 pts. remains below par. It’s the fourth consecutive negative reading. Morning data, despite burdening the union currency, had not been marked on the euro-dollar chart, whose quotes have been hovering around 1.096 USD since Friday.
Unfortunate złoty
The beginning of October is not merciful to the national currency. The XXXPLN charts from session to session reach ever higher levels. On Monday before noon, the EUR/PLN rate breaks through 4.32 PLN, and USD/PLN is already above 3.94 PLN. The situation looks similar on the franc chart, where an attempt is being made to break through the resistance of 4.59 PLN. The złoty, as a currency negatively correlated with the dollar, is burdened by the global strengthening of the “greenback”. Additionally, the increasing uncertainty related to the conflict in the Middle East does not help. It is worth noting that today, the złoty cannot find support in the hawkish narrative of the Polish Monetary Policy Council (RPP) which says that the discussion about interest rate cuts in our country will only be possible after the March forecast of the National Bank of Poland (NBP) inflation. This shows that the national currency’s rates are currently dependent on external factors, which are undoubtedly a burden for the złoty.
Dawid Górny – Analyst at InternetowyKantor.pl
Source: https://managerplus.pl/wracamy-do-narracji-soft-landingu-w-usa-87131
