Weaker ADP numbers mark another rough session for the US Dollar

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6 January 2017

Matthew Ryan

Senior Market Analyst at Ebury. Providing expert currency analysis so small and mid-sized businesses can effectively navigate international markets.

The most traded currency pair in the world, EUR/USD, had a mixed Thursday.

A
fter dropping during London trading, the Euro gained some support at midday and continued trending upwards buoyed by poor December ADP data from the US. Selling pressure on the US Dollar caused the EUR/USD to surge to 1.061, it’s highest level in three weeks.

Major currencies in detail

GBP

The Pound continued to gain and ended the day 0.8% higher against the greenback.

Another excellent print from the UK economy didn’t have much impact on the Pound. Our expectations of potentially positive data released yesterday proved to be right, Services PMI Index that is the most important out of three released recently rose to 56.2, its highest level in over a year. The print came out beating expectations by as much as 1.5 points. Limited market movement immediately after the publication suggests that trading in Sterling still depends mostly on Brexit developments, not macroeconomic information.

With no major economic releases from the UK today Sterling should react mostly to the events elsewhere, especially in the US.

EUR

Euro ended the Thursday’s session 0.4% higher against the US Dollar.

The Producer Price Index (PPI) released yesterday is yet another positive piece of information from the Eurozone this week. After CPI and Base Inflation Numbers, PPI turned positive for the first time in three-and-half years. The November Index rose 0.1% on a yearly basis. Another measurement of inflation showing signs of improvement eased the pressure on ECB and brought support to the Euro, which continued its recent gains. However, these sharp moves in the absence of major news are consistent with rebalancing of positions and Euro short covering rather than fundamental moves.

Today’s publications from the Eurozone should have little impact on the common currency. The only datapoint to watch in the Euro-area is Retail Sales for November. The Euro should react to US job-market data – a positive print should lead to retracement of some of its recent gains.

USD

The US Dollar Index declined 0.5% against major peers on Thursday.

Macroeconomic data from the US shows that only 153,000 jobs have been added to the economy in December. The print disappointed the consensus of the economists that expected the number to be around 170,000. It is not an optimistic sign, especially in face of today’s Nonfarm Payroll data. However, due to low correlation between the two pieces of data, relatively weak ADP numbers don’t add much information about the payroll report.

Today’s Nonfarm Payrolls are the most important piece of data, mainly the change in the average earnings and unemployment rate.