Employment in the United States’ (US) private sector increased by 44K in July, the Automatic Data Processing (ADP) reported on Wednesday. This reading followed the 98K increase recorded in June and came in below the market expectation of 70K.
“Job-changers are highly sensitive to real-time economic conditions, and their rapid pay growth implies supply constraints in parts of the labor market,” said Dr. Nela Richardson, ADP Chief Economist. “Typical hiring patterns, meanwhile, are changing as employers react to shifting macro-economic conditions,” Richardson added.
Market reaction to US ADP Employment Change
The US Dollar (USD) Index edged slightly lower with the immediate reaction and was last seen losing 0.22% on the day at 99.66.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.22% | -0.22% | -0.17% | -0.12% | -0.10% | 0.32% | -0.05% | |
| EUR | 0.22% | -0.00% | 0.05% | 0.09% | 0.11% | 0.53% | 0.16% | |
| GBP | 0.22% | 0.00% | 0.04% | 0.09% | 0.13% | 0.54% | 0.16% | |
| JPY | 0.17% | -0.05% | -0.04% | 0.08% | 0.10% | 0.51% | 0.14% | |
| CAD | 0.12% | -0.09% | -0.09% | -0.08% | 0.02% | 0.46% | 0.07% | |
| AUD | 0.10% | -0.11% | -0.13% | -0.10% | -0.02% | 0.42% | 0.05% | |
| NZD | -0.32% | -0.53% | -0.54% | -0.51% | -0.46% | -0.42% | -0.36% | |
| CHF | 0.05% | -0.16% | -0.16% | -0.14% | -0.07% | -0.05% | 0.36% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
This section below was published as a preview of the US ADP Employment Change data for July at 08:30 GMT.
- The US ADP Employment Change report is expected to show the private sector added 70K new positions in July.
- The Middle East conflict dictates the market’s direction ahead of US employment data release.
- The US Dollar trades with a weak tone, sellers gather around the 100.00 mark.
The Automatic Data Processing (ADP) Research Institute will release its monthly report on private-sector job creation for July on Wednesday. The ADP Employment Change report is expected to show that the United States (US) private sector added 70K new positions in the month, following the 98K gained in June.
As usual, the ADP report will precede the US Bureau of Labor Statistics Nonfarm Payrolls (NFP) report scheduled for Friday. And while not always aligned, market participants tend to read the first as an anticipation of the latter. The NFP offers a comprehensive view of the employment situation in the country, as it includes private and government jobs alongside the monthly Unemployment Rate, a critical figure for the Federal Reserve (Fed), which bases its decisions on both employment and inflation levels.
ADP jobs report to be overshadowed by geopolitical headlines
As said, there is a clear near-term correlation between the ADP Employment Change report and the NFP report, meaning a strong ADP does not guarantee a similarly upbeat NFP. Nevertheless, the figures tend to impact the US Dollar (USD), with better-than-anticipated figures generally boosting demand for the Greenback.
Heading into the release, however, market attention lies elsewhere: the Middle East war. The back and forths between the US and Iran, and the closure of the Strait of Hormuz, have pushed Oil prices and the Greenback up in the zenith of tensions, and down with surging hopes for an end to the conflict.
News on Tuesday were optimistic as US Treasury Secretary Scott Bessent said in a CNBC interview that a deal with Iran to reopen the Strait of Hormuz could be reached as soon as Tuesday or Wednesday. He added that he expects energy prices to “settle back down,” and expressed confidence that the Federal Reserve will effectively manage the balance between growth and inflation. Such headlines pushed Oil prices sharply lower, while partially weighing on the USD.
Beyond war headlines, speculative interest will assess employment data in relation to future Fed monetary policy decisions. The central bank left its benchmark rate unchanged in a range of 3.50%-3.75% when it met in mid-July, kind of disappointing investors hoping for a rate hike meant to tame inflation. Chair Kevin Warsh has multiple times pledged to combat price pressures, but gave no clues on how he plans to do so. The announcement damaged the Fed’s credibility
On employment, Fed officials noted that “Job gains have kept pace with the workforce, and the unemployment rate has changed little,” signaling stability in the labor market. The July ADP report is expected to confirm such a view.
When will the ADP report be released, and how could it affect the USD?
The US ADP Employment Change report will be out on Wednesday at 12:15 GMT, and it is expected to show that the private sector added 70K new jobs in July. As previously mentioned, the USD trades with a tepid tone following the announcement of a potential end to the Middle East crisis.
Valeria Bednarik, Chief Analyst at FXStreet, notes: “The US Dollar Index (DXY) failed to overcome the 100.00 mark on Tuesday, and trades near a two-month low of 99.42 ahead of US employment data release. The index turned bearish after topping the 101.60 region in late July, and seems poised to extend its slump. The 100-day Simple Moving Average (SMA) acts as immediate downward barrier at 99.70, ahead of the mentioned low. The 20-day SMA, in the meantime, gyrates south far above the current level, reflecting mounting selling interest. Still, DXY’s current weakness is directly linked to Middle East optimism.”
Bednarik adds: “An upbeat US ADP Employment Change report could provide near-term support to the DXY, but as the Fed is more worried about inflation than about employment, it seems unlikely that the figure will trigger a relevant market reaction. The opposite scenario is also valid, with tepid figures pushing the DXY lower. Substantial gains beyond 100.00 seem unlikely, yet the next relevant resistance comes at 100.45, July 31 high.”
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
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