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The ADP employment report anticipates another strong increase in US payrolls next Friday. The analysts at TD Securities, however, warn about excessive enthusiasm, as the increase of COVID-19 cases might dent employment recovery.


Key quotes

“Payrolls probably rose strongly again in June: We estimate up 4.0mn, following a 2.5mn gain in May. A sizable gain has been signaled by Fed economists’ analyses of weekly ADP data through the end of May and daily Homebase data through the second week of June (the sample week).”

“That said, a 6.5mn rise over two months would reverse less than a third of the 22mn plunge in the previous two months, and the renewed uptrend in COVID cases cautions against extrapolating. Indeed, the Homebase data show upward momentum stalling in the two weeks since the sample week.”

“The FX backdrop is starkly different ahead of this payrolls data compared to the surprise gain in last month’s report. The COVID curve was flattening as opposed to surging now. The USD was in broad-based retreat as global equity markets were outpacing the US compared to a much more mixed performance for FX.”