Private sector employment in the US rose 122,000 in December and annual pay was up 4.6% year-over-year, the Automatic Data Processing (ADP) reported on Wednesday. This reading followed the 146,000 increase recorded in November and came in below the market expectation of 140,000.
Assessing the report's findings, "the labor market downshifted to a more modest pace of growth in the final month of 2024, with a slowdown in both hiring and pay gains," said Nela Richardson, chief economist, ADP. "Health care stood out in the second half of the year, creating more jobs than any other sector."
Market reaction
The US Dollar Index retreated slightly from session highs after this report and was last seen rising 0.48% on the day at 109.20.
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.48% | 1.11% | 0.27% | 0.19% | 0.53% | 0.66% | 0.23% | |
| EUR | -0.48% | 0.62% | -0.24% | -0.30% | 0.04% | 0.17% | -0.25% | |
| GBP | -1.11% | -0.62% | -0.82% | -0.91% | -0.58% | -0.44% | -0.87% | |
| JPY | -0.27% | 0.24% | 0.82% | -0.06% | 0.28% | 0.40% | -0.02% | |
| CAD | -0.19% | 0.30% | 0.91% | 0.06% | 0.33% | 0.47% | 0.04% | |
| AUD | -0.53% | -0.04% | 0.58% | -0.28% | -0.33% | 0.13% | -0.30% | |
| NZD | -0.66% | -0.17% | 0.44% | -0.40% | -0.47% | -0.13% | -0.43% | |
| CHF | -0.23% | 0.25% | 0.87% | 0.02% | -0.04% | 0.30% | 0.43% |
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 at 08:30 GMT.
- The ADP Employment Change will likely have a limited impact on financial markets.
- The US private sector is expected to have added 140,000 new positions in December.
- The US Dollar Index corrected extreme overbought conditions, retains its bullish stance.
Financial markets slowly return from the winter holidays and the macroeconomic calendar starts to be packed. These days, the focus has been on the United States (US) and President-elect Donald Trump’s proposed tariffs. Market sentiment has led the way in the absence of relevant data, with the mood seesawing between hopes and despair of what the new US administration would mean to the global economy.
US employment, however, is taking centre stage. The ADP Research Institute will release the December Employment Change report on Wednesday, a survey that estimates the number of new jobs created by the private sector.
It is worth remembering that the ADP report is typically released two days before the official Nonfarm Payrolls (NFP) report. The ADP data is often viewed as an early preview of the Bureau of Labor Statistics (BLS) jobs report. However, the connection between the two has proven inconsistent over time.
Employment growth and its role in shaping Fed policy
Employment is critical, as is one of the two legs of the Federal Reserve’s (Fed) dual mandate. The US central bank should maintain price stability and pursue maximum employment. As inflationary pressures receded, the focus temporarily shifted to employment in the second quarter of 2024, as a strong labor market somehow posed a risk to inflation.
Still, the focus returned to inflation after the 2024 presidential election. Former president Donald Trump won the run and will return to the White House as the 47th US president in a few days. Not only did he achieve victory, but the Republican party also won control of Congress, leading in both houses.
Fears that Trump’s policies will result in fresh inflationary pressures have helped the Fed to adopt a more cautious approach to interest rate cuts. The Fed trimmed the benchmark interest rate for the first time in September, delivering cuts also in November and December to a total of 100 basis points (bps) in 2024.
In the December monetary policy meeting, however, US policymakers anticipated through the Summary of Economic Projections (SEP) or dot plot, that the pace of interest rate cuts will slow down this year, foreseeing just two potential trims in 2025.
At this point, it seems unlikely the ADP report, or even the upcoming NFP report on Friday, could affect expectations of two modest rate cuts. One-month figures on their own hardly affect the central bank’s stance.
According to the CME FedWatch Tool, the odds for an interest rate cut overcome those for an on-hold decision only in June.
With that in mind, ADP figures will probably be taken with a pinch of salt.
When will the ADP Report be released, and how could it affect the USD Index?
The ADP Employment Change report for December will be released on Wednesday at 13:15 GMT. It’s expected to show that the US private sector added 140K new jobs after gaining 146K in November.
Ahead of the release, the US Dollar Index (DXY) has retreated from a multi-year peak of 109.56 posted on Jan 2 and hovers around the 108.00 mark. A reading in line with expectations should have no impact on the DXY, particularly considering that the Federal Open Market Committee (FOMC) will release the Minutes of the December meeting later in the day. Speculative interest will likely wait for the document, hoping it could offer some clues on upcoming monetary policy decisions.
An upbeat figure could signal a stronger labour market, keeping the Fed on the hawkish side. As a result, the US Dollar Index should regain its prevalent strength. The opposite scenario, however, will not be as straightforward. A poor report will not be enough to boost speculation of a soon-to-come interest rate cut. The DXY may fall as an immediate reaction to the news, but the decline will likely be short-lived.
From a technical perspective, Valeria Bednarik, Chief Analyst at FXStreet, says: “The US Dollar Index (DXY) corrected overbought conditions in the daily chart, with the downward run losing steam. In the mentioned time frame, a bullish 20 Simple Moving Average (SMA) provides dynamic support at around 107.90, attracting buyers for a second consecutive day. Technical indicators, in the meantime, are turning flat above their midlines, reflecting easing buying interest.”
Bednarik adds: “Buyers will likely take their chances on dips, with immediate support at 107.74, the December 30 intraday low. Additional slides may see DXY falling towards 107.18, the December 13 high, with a break below 107.00 unlikely with the ADP release. Initial resistance lies at 108.55, the December 20 intraday high, with gains beyond the latter exposing the aforementioned 109.56 multi-year high.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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