EURUSD,H1
US ADP reported private payrolls increased only 374,000 in August, another disappointing number and about half the consensus estimate of 650,000. Also, the already soft July report was revised lower to 326,000 from 330,000. The bulk of the gains continue to come from the service sector which added 329,000 workers. Jobs in the goods sector rose 45,000. In the services category, employment in leisure/hospitality led the month’s pick up, adding 201,000, followed by education/health at 59,000, with professional business services rising 19,000. Trade/transport added 18,000 workers with jobs in financial activities edging up 13,000. The report reflects numerous headwinds in hiring and portends a soft BLS employment release on Friday, where the SmartEstimate from the Reuters poll is for the Non-Farm Payroll to grow by 726,700 with the range in the poll estimates varying from 375,000 to 1,027,000.
As for the follow through for the NFP data, Action Economics sum it up like this: “The last two restrained monthly ADP headline gains imply downside risk for Friday’s jobs report, though the ADP data remain an unreliable predictor of monthly payroll swings. We no longer assume an “as reported” ADP bias relative to the BLS private payroll figures, despite a pattern of ADP undershoots earlier in the pandemic, given more recent overshoots in April and May, and previously in December and January.”
The Dollar headed lower after the weak ADP jobs report, EURUSD edged up to 1.1845 from near 1.1815, while USDJPY breached 110.00, touching 109.90 down from 110.35. Equity futures remain 0.3% to 0.4% higher, while yields moved a bit lower. Yields are down from Asian session t highs. It’s a modest move, however, as there is a big error term on the headline number compared to the BLS figure. The 10-year rate is now 0.7 bps lower at around 1.304%. It was at a 1.33% earlier today. The rate averaged 1.28% for August.
Still to come today, the key ISM manufacturing PMI which is expected to slip a whole point drop from 59.5 to 58.5 and the Weekly Crude Oil Inventories which are expected to show a drawdown of -2.5 million barrels.
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Stuart Cowell
Head Market Analyst
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