Friday’s data from the US labor market were to support the dollar and reverse the trend that we see from the first days of the new year. This did not happen, mainly because of the disappointing pace of wage growth. Despite the robust growth of employment dollar lost, which allowed us to pay less than 4 PLN for 1 USD first time in several months.
Employment in the US increased by 227 thousand and expected was increase of 180 thousand compared to previous reading of 157 thousand., which was revised slightly upwards. Private payrolls fared higher at 237 thousand., which means that employment in the government sector fell by 10 thousand. The unemployment rate rose to 4.8%, which shows that the labor market may actually be subject to slight overheating. On the other hand, a slight rebound of this measure is probably the effect of the growth rate of economic activity. However, the worst factor of the entire report was wages.
Monthly wage growth was only 0.1% m / m, with an expected growth of 0.3% m / m. Moreover, reduced data for the previous month of 0.4% m / m to 0.2% m / m. Why market highlighted the wages? The higher pace of growth should lead to higher consumer purchasing power, which should translate into greater demand and, consequently, an increase in inflation. Consequently, higher wages would be an argument for faster interest rate hikes in the US. At the moment the Fed has no reason to hurry, which should limit the strength of the US currency.
On the other hand, more and more interesting situation can be observed on the European market. Economic data are significantly improved, but the political situation may significantly complicate. During the weekend presidential campaign was inaugurated by Marine Le Pen, which is considered the favorite in the first round of presidential elections in France. Le Pen is known for her criticism of the euro, and therefore increase of support from potential voters could be a negative factor for the single currency. Especially with recent surveys show declining support for the party of Angela Merkel, which means that in the coming months, the balance of power on the European political scene may reshuffle. If that happens the reaction of the currency market could be violent.
Last week brought a lot of interesting events, including the decisions of central banks, as well as key figures from the US. The second week of February promises to be much calmer, but it may be a false impression. Since the swearing of Donald Trump does not yet passed a month, and the new president of the United States may surprise markets with further ideas. In addition, it is worth noting the return of the Chinese market, as well as interesting data from Canada. At 9:10 euro cost 4.29 PLN, and we paid 3.99 PLN per dollar.
Jakub Stasik, analyst of XTB