The ADP Non-Farm Payrolls report exceeded all expectations by showing a gain of no less than 298K private sector jobs in February. This easily topped projections of an average gain of 184K. In addition, the already-positive figure of +246K for January was upgraded to 261K.
The ADP report was released relatively late in the month, as also the official BLS Non-Farm Payrolls indicator is due late. This implies that the data has a solid base.
The ADP number is also the last indicator towards Friday’s NFP. Previous top-tier numbers were also upbeat: these are the ISM numbers for the manufacturing and non-manufacturing (services) sectors.
Is the NFP that important?
Well, after a barrage of Federal Reserve officials basically told us that the Fed will raise rates in March, the bar is quite low. Fed Chair Yellen had the last word and she basically said that barring a disaster, the FOMC is set to hike.
Yellen gave the green light for a hike and the ADP number showed that a disaster is quite unlikely on Friday. However, given Yellen’s usually dovish stance and with other figures not necessarily showing strong growth in Q1 2017, many thought that the Fed was bringing forward the hike.
The rising tide in stock markets provides an opportunity to sneak in a hike without a pushback from markets. But, the Fed’s stated path of three hikes in 2017 was left unaltered.
Or maybe not.
More hikes, more dollar strength
With such a strong jump in private job gains, perhaps the NFP will open the door to an accelerated path in 2017: four hikes, one in every “important” meeting, an event that consists of new forecasts and a press conference by Yellen.
Under this growing speculation, the dollar has room to rise.
The greenback is gaining ground across the board. The stubborn euro gave a decent fight to the American currency, but it is also succumbing to pressure.
- EUR/USD is lower in the range, at 1.0540 and getting closer to the 1.0520 support level.
- GBP/USD continues its struggle. A messy Brexit and no relief from the Spring Statement hurts sterling.
- USD/JPY is moving higher, at 114.57 and looking toward 115.
- USD/CAD is touching 1.35, but that is mostly due to a collapse in oil prices.
- AUD/USD is back down to the 0.75 handle, trading around 0.7540.
- NZD/USD is around 0.6915.
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