The United States (US) Automatic Data Processing (ADP) Research Institute will release the private employment data for March on Wednesday. The survey provides information about job creation in the private sector and it is usually released two days before the official jobs report of the Bureau of Labor Statistics (BLS), which features Nonfarm Payrolls (NFP) data.
According to market analysts, the ADP survey is expected to show 148K new positions were added in March, slightly above the 140K reported in February. However, previous readings are always subject to revisions, and a solid ADP survey hardly means an in-line NFP report, as the correlation between the two reports has been sporadic, to say the least.
Still, the relevance of the ADP survey is enhanced by the fact the US releases multiple employment-related data in the days previous to the NFP publication. All combined help market participants find clues on what the Federal Reserve (Fed) may do next with monetary policy.
Fed Chairman Jerome Powell has multiple times explained a tight labor market weighs against the case of lower interest rates, as it risks lifting inflationary pressures through wage increases. As of lately, American policymakers are less concerned about the employment situation, although they seem comfortable where they are.
Powell participated in a discussion at the Macroeconomics and Monetary Policy Conference in San Francisco on Friday. He said the economy is strong and that policymakers are not in a hurry to cut rates. He repeated that they want to be more confident before doing so. According to the CME FedWatch Tool, the odds for a June rate cut are roughly 56%, following Powell’s comments and data indicating that the core Personal Consumption Expenditures (PCE) inflation remained steady at 2.8% YoY in February.
The ADP survey also offers pay data. In February, the report showed that “pay gains for job-changers accelerated for the first time in more than a year, rising to 7.6% from 7.2%.”
Nela Richardson, ADP Chief Economist, noted: “Job gains remain solid. Pay gains are trending lower but are still above inflation. In short, the labor market is dynamic but doesn't tip the scales in terms of a Fed rate decision this year.”
With that in mind, another solid report will likely further undermine the odds of a rate cut in June and put financial markets in risk-off mode.
When will the ADP Jobs Survey will be released and how could it affect DXY? The ADP survey on job creation will be out on Wednesday and is expected to report the private sector added 148K new positions in March. If the headline reading widely surpasses the estimate, it could be understood as a stubbornly strong labor market. Combined with higher wages, the news will likely boost demand for the USD. The opposite scenario, weak job creation alongside easing wages, should push the Greenback into negative ground amid a better sentiment.
From a technical perspective, Valeria Bednarik, Chief Analyst at FXStreet, notes: “The Dollar Index (DXY) flirts with 105.00 ahead of the announcement, after hitting 105.10 on Tuesday, a fresh 2024 high. The bullish momentum, however, is missing in the daily chart, despite the overall picture favors an upward continuation. The DXY develops above its moving averages, although the 100 and 200 Simple Moving Averages (SMAs) lack directional strength. Only the 20 SMA seems to be giving signs of life, grinding marginally higher and poised to cross above the 100 SMA. Meanwhile, technical indicators remain within positive levels, although without clear directional strength.”
Bednarik adds: “Beyond the 105.20 region, the DXY has little to deal with until 105.50. A daily close above the latter should confirm the bullish case and pave the way for a test of the 106.00-106.10 price zone. On the other hand, immediate support is located at 104.70, followed by 104.25.”
