Tag: Breaking

  • The ADP Employment Report rose by 77K in February

    The ADP Employment Report rose by 77K in February


    In February, private sector employment in the US grew by just 77K, coming in short of initial estimates of 140K, according to the latest Automatic Data Processing (ADP) report. In addition, the reading was lower than January’s 186K (revised from 183K).

    Following the release, Nela Richardson, ADP’s Chief Economist, said that policy uncertainty and a slowdown in consumer spending might have led to layoffs or reduced hiring during the previous month. She noted that ADP’s data, along with other recent indicators, pointed to a cautious approach among employers as they evaluated the economic outlook.

    Market reaction

    The Greenback extends its decline and challenges the 105.00 support for the first time since early November when tracked by the US Dollar Index (DXY).

    US Dollar PRICE Today

    The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.

      USD EUR GBP JPY CAD AUD NZD CHF
    USD   -0.88% -0.27% 0.10% -0.53% -0.51% -0.59% -0.01%
    EUR 0.88%   0.62% 0.99% 0.35% 0.37% 0.29% 0.89%
    GBP 0.27% -0.62%   0.34% -0.26% -0.25% -0.33% 0.26%
    JPY -0.10% -0.99% -0.34%   -0.64% -0.64% -0.72% -0.12%
    CAD 0.53% -0.35% 0.26% 0.64%   0.02% -0.06% 0.53%
    AUD 0.51% -0.37% 0.25% 0.64% -0.02%   -0.07% 0.52%
    NZD 0.59% -0.29% 0.33% 0.72% 0.06% 0.07%   0.60%
    CHF 0.00% -0.89% -0.26% 0.12% -0.53% -0.52% -0.60%  

    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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

    This section below was published as a preview of the US ADP Employment Change data at 08:30 GMT.

    • The ADP Employment Change, and the US labour market, take centre stage this week.
    • The US private sector is seen adding 140K new jobs in February. 
    • The US Dollar Index continues to trade in the lower end of the range.

    The US labor market is set to take center stage this week as fresh concerns mount that the economy may be losing its momentum — a sentiment echoed by recent slower growth and worrisome fundamental data.

    In the spotlight, the ADP Research Institute is poised to release its February Employment Change report on Wednesday, offering a snapshot of private-sector job creation.

    Typically coming out two days before the official Nonfarm Payrolls (NFP) report, the ADP survey is often seen as an early indicator of trends expected in the Bureau of Labor Statistics (BLS) jobs report — even if the two don’t always tell the same story.

    The economic equation: Job growth and Fed policy in focus

    Employment is critical as it forms one of the two legs of the Federal Reserve’s (Fed) dual mandate. The US central bank is tasked with maintaining price stability while pursuing maximum employment. As inflationary pressures remain stubborn, the focus appears to have temporarily shifted to the performance of the US labour market following the Fed’s hawkish stance at its January 28–29 meeting.

    In the meantime, investors continue to closely monitor the White House’s trade policies and their consequences, particularly after US tariffs on Canadian and Mexican imports took effect on March 4. Fears that these levies could fan the flames of a resurgence in inflationary pressure have driven both the Fed’s prudent approach and the cautious remarks from many of its policymakers.

    So far, and in light of the recent set of weaker-than-expected results that have challenged the notion of US “exceptionalism”, market participants now expect the Fed to reduce interest rates by 50 basis points this year.

    Amid the ongoing tariff turmoil, the apparent slowing momentum of the US economy, and persistent consumer price pressures, the ADP report — and especially Friday’s Nonfarm Payrolls report — has gained renewed relevance and could help shape the Fed’s next move.

    When will the ADP Report be released, and how could it affect the US Dollar Index?

    The ADP Employment Change report for February is set to drop on Wednesday at 13:15 GMT with forecasts pointing to an addition of 140K new jobs following January’s gain of 183K. In anticipation, the US Dollar Index (DXY) remains securely on the defensive, putting the key support at 106.00 to the test amid rising jitters over the US economy.

    If the ADP report delivers robust numbers, it could momentarily cool the mounting concerns over the US economic slowdown. However, if the results fall short of expectations, it might reinforce worries that the economy is losing momentum—potentially prompting the Fed to reconsider an earlier restart of its easing cycle.

    According to Pablo Piovano, Senior Analyst at FXStreet, “If the recovery gains traction, the DXY could revisit the weekly peak of 107.66 (February 28), a region that appears reinforced by the proximity of the transitory 55-day SMA around 107.90, ahead of the February high of 109.88 set on February 3, and the YTD peak of 110.17 from January 13. Surpassing that level might pave the way toward the next resistance at the 2022 high of 114.77 recorded on September 28.

    “On the flip side, if sellers manage to seize control, the index might first find support at the 2025 bottom of 105.89 reached on March 4, prior to the December 2024 bottom of 105.42, and eventually at the critical 200-day SMA in the 105.00 zone. Staying above that key threshold is essential for sustaining bullish momentum,” Piovano concludes.

    GDP FAQs

    A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022. Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.

    A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency. When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.

    When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.

    Fed FAQs

    Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

    The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

    In extreme situations, the Federal Reserve may resort to a policy named 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 during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

    Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.

     



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  • The ADP Employment Report rose by 77K in February

    Trade and inmigration pose risks to inflation


    At last month’s meeting, Fed officials debated whether it might be wise to slow or even pause the reduction of their balance sheet holdings, given that renewed concerns over the federal debt ceiling have come back into play.

    In addition, the Minutes showed the staff’s economic outlook remained largely unchanged from December.

    Key highlights

    All participants at Fed’s January 28-29 meeting saw it as appropriate to hold target interest rate unchanged.

    Some participants cited potential changes in trade and immigration policy as having potential to hinder disinflation process.

    Vast majority of participants judged risks to dual mandate objectives were roughly in balance.

    A couple of participants said it appeared that risks to achieving inflation mandate were greater than risks to employment mandate.

    Various participants said it may be appropriate to consider pausing or slowing balance sheet runoff until resolution of debt ceiling dynamics.

    Many participants said after conclusion of balance sheet runoff it would be appropriate to structure asset purchases to move maturity composition closer to outstanding stock of Treasury debt.

    Fed survey respondents saw balance sheet runoff process concluding by mid-2025, slightly later than previously expected.

    Fed staff’s economic outlook largely unchanged from the one provided at December meeting.

    In initial discussions of framework review, policymakers expressed openness to changing elements introduced in 2020 document.

    This section below was published as a preview of the FOMC Minutes of the December 17-18 meeting at 18:00 GMT. 

    • The Minutes of the Fed’s January 28-29 policy meeting will be published on Wednesday.
    • Details surrounding the discussions on the decision to keep policy settings unchanged will be scrutinized by investors.
    • Markets see virtually no chance of a 25 bps Fed rate cut in March. 

    The Minutes of the United States (US) Federal Reserve’s (Fed) January 28-29 monetary policy meeting will be published on Wednesday at 19:00 GMT. Policymakers decided to maintain the policy rate at the range of 4.25%-4.5% at the first meeting of 2025. However, the central bank removed earlier language suggesting inflation had “made progress” toward its 2% target, instead stating that the pace of price increases “remains elevated.”

    Jerome Powell and co decided to hold policy settings unchanged after January meeting

    The Federal Open Market Committee (FOMC) voted unanimously to keep the policy rate unchanged. The statement showed that officials expressed confidence that progress in reducing inflation will likely resume later this year but emphasized the need to pause and await further data to confirm this outlook.

    In the post-meeting press conference, Fed Chairman Jerome Powell reiterated that they don’t need to be in a hurry to make any adjustments to the policy. 

    Commenting on the policy outlook earlier in the week, Philadelphia Fed President Patrick Harker said that the current economy argues for a steady policy for now. Similarly, Atlanta Fed President Raphael Bostic noted that the need for patience suggests that the next rate cut could happen later to give more time for information.

    When will FOMC Minutes be released and how could it affect the US Dollar?

    The FOMC will release the minutes of the January 28-29 policy meeting at 19:00 GMT on Wednesday. Investors will scrutinize the discussions surrounding the policy outlook.

    In case the publication shows that policymakers are willing to wait until the second half of the year before reconsidering rate cuts, the immediate reaction could help the US Dollar (USD) gather strength against its rivals. On the other hand, the market reaction could remain subdued and short-lived if the document repeats that officials will adopt a patient approach to further policy easing without providing any fresh clues on the timing.

    According to the CME FedWatch Tool, markets currently see virtually no chance of a 25 basis point rate cut in March. Moreover, they price in a more than 80% probability of another policy hold in May. Hence, the market positioning suggests that the publication would need to offer very clearly hawkish language to provide a steady boost to the USD.

    Eren Sengezer, European Session Lead Analyst at FXStreet, shares a brief outlook for the USD Index:

    “The Relative Strength Index (RSI) indicator on the daily chart stays well below 50 and the index remains below the 20-day Simple Moving Average (SMA), highlighting a bearish bias in the short term.”

    “On the downside, 106.30-106.00 aligns as a key support area, where the 100-day SMA and the Fibonacci 38.2% retracement of the October 2024 – January 2025 uptrend are located. If this support area fails, 105.00-104.90 (200-day SMA, Fibonacci 50% retracement) could be set as the next bearish target. Looking north, resistances could be spotted at 107.50-107.70 (20-day SMA, Fibonacci 23.6% retracement), 108.00 (50-day SMA) and 109.00 (round level).”

    Fed FAQs

    Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

    The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

    In extreme situations, the Federal Reserve may resort to a policy named 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 during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

    Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.

    Inflation FAQs

    Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.

    The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.

    Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.

    Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.

     



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