Private sector employment in the US rose by 140,000 in February and annual pay was up 5.1% year-over-year, the Automatic Data Processing (ADP) reported on Wednesday. This reading followed the 111,000 increase (revised from 107,000) recorded in January and came in below the market expectation of 150,000.
Assessing the survey's findings, “job gains remain solid. Pay gains are trending lower but are still above inflation,” said Nela Richardson, chief economist, ADP. “In short, the labor market is dynamic, but doesn't tip the scales in terms of a Fed rate decision this year.”
Market reaction to ADP employment data
The US Dollar remains under modest selling pressure after the ADP employment data. At the time of press, the US Dollar Index was down 0.15% on the day at 103.62.
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 Australian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.14% | -0.10% | -0.06% | -0.32% | -0.31% | -0.27% | 0.09% | |
| EUR | 0.16% | 0.06% | 0.09% | -0.14% | -0.16% | -0.12% | 0.27% | |
| GBP | 0.12% | -0.03% | 0.04% | -0.20% | -0.17% | -0.13% | 0.22% | |
| CAD | 0.05% | -0.08% | -0.06% | -0.26% | -0.25% | -0.22% | 0.15% | |
| AUD | 0.33% | 0.19% | 0.21% | 0.25% | 0.01% | 0.04% | 0.42% | |
| JPY | 0.32% | 0.16% | 0.19% | 0.24% | -0.01% | 0.04% | 0.39% | |
| NZD | 0.28% | 0.15% | 0.17% | 0.21% | -0.03% | -0.02% | 0.41% | |
| CHF | -0.08% | -0.23% | -0.19% | -0.15% | -0.39% | -0.38% | -0.35% |
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 Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
This section below was published as a preview of the US ADP employment data at 08:30 GMT.
- The ADP survey is expected to show the US private sector added 150K new jobs in February.
- Upbeat jobs data in January caused investors to price in a delay in the Fed policy pivot.
- Wage inflation figures will be watched closely by market participants.
The Automatic Data Processing (ADP) Research Institute will release the private employment data for February on Wednesday. The survey is an independent estimate of private-sector employment and pay, usually released two days ahead of the Bureau of Labor Statistics’ (BLS) official jobs report, which features Nonfarm Payrolls (NFP) data.
The correlation between the ADP Employment Change and NFP numbers is not always the most reliable and its results tend to diverge from the official job creation numbers provided by the BLS. Still, market participants pay attention to the ADP figures as part of the multiple employment-related releases that take place in the days preceding the NFP publication.
In January, the ADP reported that employment in the private sector rose by 107,000, missing the market expectation of 145,000, and annual pay was up 5.2% year-over-year. In the same period, NFP increased by 353,000 to surpass analysts’ estimate of 180,000 by a wide margin.
After leaving the policy settings unchanged in January, Federal Reserve (Fed) Chairman Jerome Powell said in the post-meeting press conference that it was not likely for them to start reducing the policy rate as early as March. "If we saw an unexpected weakening in the labor market, that would make us cut rates sooner," Powell added. Impressive labor market data for January reaffirmed a delay in the Fed’s policy pivot and helped the US Dollar stay resilient against its rivals in early February.
When will the ADP Jobs Survey will be released and how could it affect EUR/USD?
The ADP Research Institute is expected to report on Wednesday that the private sector added 150,000 new positions in February.
In case the data comes in below 100,000, this could be seen as a sign of a weakening labor market and make it difficult for the USD to find demand. On the other hand, a print between 150,000 and 200,000 could provide a boost to the currency with the immediate reaction. If the data arrives near the market consensus, wage inflation figures could drive the USD’s valuation. An increase of 5.5% or higher in annual pay could be seen as a USD-positive print.
Ahead of Fed Chairman Powell’s testimony and Friday’s jobs report, however, investors could refrain from taking large positions based only on the ADP data. Hence, the market reaction could remain short-lived.
Eren Sengezer, European Session Lead Analyst, shares a brief technical outlook for EUR/USD:
“The 100-day and the 200-day Simple Moving Averages (SMA) form a pivot level for the pair at 1.0830. Technical buyers could remain interested as long as this level holds as support. On the upside, 1.0950 (Fibonacci 23.6% retracement of the October-December uptrend) could be seen as the next resistance ahead of 1.1000 (psychological level, static level). If the pair returns below 1.0830 and starts using this level as resistance, 1.0800 (Fibonacci 50% retracement) could be seen as interim support before 1.0700 (Fibonacci 61.8% retracement).
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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