ADP + ISM Non-Manufacturing PMI Preview: last minute hints could raise expectations for Friday's NFP

• The ADP NFP and the ISM Non-Manufacturing PMI are heavyweight hints towards the jobs report.
• The 4th of July holiday implies changes in the expected reaction. 
• The US Dollar looks well-positioned to take advantage of the data.

The ADP Non-Farm Payrolls is published on Thursday, July 5th, at 12:15 GMT. The report is typically released on the Wednesday before the official BLS NFP on Friday. This time, it is delayed due to the Fourth of July holiday on Wednesday. The unusual timing leaves traders with fewer hours to react and prepare for the NFP.

ADP reported a gain of 178,000 private sector positions in the US in May. Expectations for June are very similar: 180,000. In general, these numbers are well within the norm, making the reaction quite straightforward: a result of above 200,000 would give the greenback an edge while a miss, especially under 150,000, would weigh on the American currency.

It is important to note that ADP data is only for the private sector and is not always 100% correlated with the official private sector section of the official BLS report.

The ISM Non-Manufacturing PMI is released at 14:00 GMT. The 105 minutes between the publications provide enough time to digest the ADP report and get ready for the next edition.

The forward-looking survey for the services sector also provides a hint towards the NFP, as the vast majority of people work in this sector. It also serves as a broad gauge of the economy.

Expectations stand at a small slide from 58.6 to 58.2 points. However, forecasts were similar for the ISM Manufacturing PMI, and it beat with over 60 points. As both sectors usually move in correlation with each other, a score over 60 would not be a surprise, but would nevertheless be good news for the industry and the US economy as such a score reflects robust growth.

Implications of the timing

The timing has another consequence apart from pushing forward the ADP report. It bundles both events together on the same day. If both figures go in the same direction, either beating expectations or missing, the impact on the greenback would be greater than if they offset each other. The publication on the same day makes them more critical than usual.

Another implication of the holiday is that volume could be low. Many Americans take long weekends around Independence Day, and some traders may be among them. Liquidity may be lower than in regular days. Lower liquidity and a surprising outcome could result in a stronger market reaction

US Dollar well-positioned

The greenback began the third quarter in an uptrend, where it left Q2. The advances are partly based on other upbeat data points but also on the looming trade wars. Trump's tariffs have rocked markets. The moves are not huge and undoubtedly not a straight line. Nevertheless, the jitters around trade are pushing the greenback higher, and the trend remains to the upside.

Apart from trade, the greenback also enjoys a hawkish central bank. The Federal Reserve not only raised rates but also signaled two additional ones later in the year. Any upbeat figures will likely be well-received, strengthening the case for a rate rise in September. A miss on both figures can probably only cause a minor bump in the trend. 

All in all, the US Dollar is set to take advantage of better numbers. 

Conclusion

The ADP NFP and the ISM Non-Manufacturing PMI are top-tier figures and critical hints for the Non-Farm Payrolls. There is a chance that the ISM figure beats predictions. Volatility may be elevated due to somewhat lower liquidity, and the US Dollar is set to take advantage of better numbers.

More: Trade War from the Trenches: everything you need to know about the three big battles ahead