The United States (US) Automatic Data Processing (ADP) Research Institute is set to unveil its private employment data for March on Wednesday. This survey offers insights into job creation within the private sector and typically precedes the official jobs report by the Bureau of Labor Statistics (BLS), which includes Nonfarm Payrolls (NFP) data.
Market analysts anticipate the ADP survey to reveal the addition of 148K new positions in March, slightly surpassing February’s reported 140K. However, previous readings are subject to revisions, and while a robust ADP survey suggests a strong labor market, it does not necessarily guarantee alignment with the NFP report, as the correlation between the two can be inconsistent.
Nevertheless, the significance of the ADP survey is underscored by the US releasing multiple employment-related data leading up to the NFP publication. These combined indicators provide market participants with insights into potential shifts in the Federal Reserve’s (Fed) monetary policy stance.
Fed Chairman Jerome Powell reiterated in a recent discussion at the Macroeconomics and Monetary Policy Conference that a tight labor market weighs against the case for lower interest rates, as it may fuel inflationary pressures through wage increases. While policymakers are less concerned about employment conditions at present, they remain cautious and prefer to await greater confidence before considering rate adjustments.
In terms of market expectations, the odds of a June rate cut currently stand at approximately 56%, following Powell’s remarks and data indicating steady core Personal Consumption Expenditures (PCE) inflation at 2.8% year-on-year in February.
The ADP survey also provides insights into wage trends. Notably, February’s report indicated an acceleration in pay gains for job-changers, reaching 7.6% from 7.2% over a year. ADP Chief Economist Nela Richardson highlighted that while job gains remain solid, pay gains are moderating but still exceed inflation levels, suggesting a dynamic labor market that does not significantly influence Fed rate decisions this year.
In light of these considerations, another robust ADP report is likely to further diminish the likelihood of a June rate cut and may prompt a risk-off sentiment in financial markets.
Regarding its potential impact on the EUR/USD pair, the ADP survey’s release on Wednesday could have varying effects depending on the headline reading. If job creation significantly exceeds expectations alongside higher wages, it could signal a resilient labor market and boost demand for the US Dollar (USD). Conversely, weak job creation coupled with declining wages may lead to USD weakness amid improved market sentiment.
From a technical perspective, the Dollar Index (DXY) hovers around 105.00 ahead of the announcement, with bullish momentum evident but lacking strong direction. Resistance levels lie around 105.20 and 105.50, while immediate support is found at 104.70 and 104.25, according to Valeria Bednarik, Chief Analyst at FXStreet.
