In light of a recent weak NFP report, an upcoming yearly revision of the U.S. job market data by the BLS seems particularly interesting. It may reveal an even weaker market, potentially sparking fears that the Federal Reserve is maintaining high interest rates for too long, thereby possibly leading to an excessive slow down or even collapse. Wall Street saw a downward trend yesterday, but on a moderate scale. The Dow Jones and SP500 fell by 0.2 percent, and the Nasdaq lost 0.3 percent. Today we will learn about the FOMC minutes and Jerome Powell will speak in Jackson Hole on Friday. The EURUSD exchange rate has crossed the 1.11 mark.
Typically, market participants show little interest in macro data revision. But this time may be different, as it will concern the job market, which has recently shown some significant weakness. In this situation, the annual revision of employment data in the U.S. can cause significant upheaval and will likely show much weaker job growth last year. The market usually passed such events unmoved, and they’ve often gone unremarked. However, the current situation is exceptional. If we were to receive a strong downward revision, then it would mean that the job market wasn’t as strong as the data indicated until March 2024. The Federal Reserve will surely take this into consideration. The market may start to speculate more forcefully about a 50 basis point reduction in the cost of money in September, which could mean a further weakening of the USD. In such a scenario, Wall Street could once again fear for the health of the US economy while voices may again emerge that the Fed overextended the period of restrictive monetary policy.
The dollar remains weak with the EURUSD trading at its highest level since the end of the previous year. Resistance lies at the 1.1130-1.1140 mark and a breach would pave the way towards the July 2023 high of 1.1250.
Until recently strong, the Polish zloty took a hit yesterday following remarks by Adam Glapinski, who issued a “dovish” statement. He admitted that a possibility exists for discussions on lowering the cost of money before 2026, dependent on the economic situation in Poland. This will depend on inflation forecasts and incoming data on price growth dynamics, as well as data describing economic activity. This morning, the EUR/PLN is up to 4.2880 and the USD/PLN to 3.8580.
Lukasz Zembik Oanda TMS Brokers
Source: https://ceo.com.pl/slaby-raport-nfp-i-rewizja-danych-fed-pod-presja-dolar-slabnie-76316
