Friday afternoon seems to bring a further weakening of the U.S. dollar, with the expectation of the official announcement of Joe Biden as the 46th President of the United States and in the background of monthly data from the American labor market.
The U.S. economy saw 638,000 new jobs in non-farm sectors in October. This is less than the figure observed in September, which was adjusted to 672,000. The market consensus assumed an increase of 600,000 jobs. The data for October is the weakest since the beginning of the epidemic. That is when 20.787 million jobs were lost. Currently, the highest employment growth was observed in the recreation and hospitality sector (271 thousand), professional and business services (208 thousand), retail (104 thousand) and construction (84 thousand). It seems that the outlook for the labor market remains pessimistic, as out of more than 22 million jobs lost in March and April, only 12 million have been recovered, and the new draft law on employment stimulation, which would provide support for millions of Americans, has not yet been approved.
The U.S. dollar continues to depreciate as its interest rate on the interbank market falls. The interest rate on the USD on the basis of the 3-month Libor rate has fallen to the lowest level in history of 0.20588%. This in turn seems to discourage its maintenance, which may translate into its weakening in the broad market. As a result, the USD/CHF exchange rate falls to 0.90000, the lowest levels since 2015. The strengthening of CHF may also be supported by the recording of successive COVID-19 case records in the United States, Italy or France. Frank and yen can also be treated as safe havens in this context.
For our local market and zloty, the decision of the Monetary Policy Council was crucial. We had to wait for it until 3:35 p.m. The Monetary Policy Council decided that interest rates in Poland would not change. The main rate will still be 0.1%. Thus, this decision does not seem to have an impact on the zloty, which this week has significantly strengthened against the US dollar and the euro. The USD/PLN exchange rate is in the area of 3.80 and EUR/PLN at 4.51.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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