Dollar Rises to Weekly High After ADP Data Shows Surge in Hiring

Updated on
  • Upside risks to NFP forecast as correlation with ADP tightens
  • Canadian dollar hits 2017 low, weighed by WTI, Nafta talk

Citi's Wieting Urges Strong Dollar Investing Caution

The dollar rose to a high for the week after a private employment survey signaled upside risks to forecasts for Friday’s U.S. jobs report.

The greenback rose versus all of its G-10 peers and the Bloomberg dollar index touched its highest since Federal Reserve Chair Janet Yellen said on March 3 that a rate hike seemed likely this month. The dollar gain was underpinned by a rise in the 10-year Treasury yield to its highest since December, while commodity-related currencies were hurt by a drop in crude oil and metals. The ADP Research Institute reported that private payrolls grew 298,000 in February, well above forecasts, prompting Goldman Sachs and Morgan Stanley to raise their estimates for the jobs report.

  • Commerce Secretary Wilbur Ross said that the administration is working on getting trade promotion authority and likely will begin renegotiating Nafta later this year; Canada and Mexico will need to make some concessions, Ross said while sidestepping questions on the strength of the dollar. The peso dropped on Ross’ remarks and the CAD fell to a 2017 low vs USD near 1.3500 as WTI crude fell to a new low for the year below $51.00.
  • FX action was muted ahead of the Thursday ECB meeting, though traders are still inclined to buy the dollar on dips amid expectations that the path of U.S. monetary policy remains on an upward trajectory while that of Europe and Japan remains flat at best.
  • The ECB is expected to keep rates and policies on hold while continuing with QE at previously announced levels; Draghi press conference will be parsed for clues on whether the central bank is considering shifting its policy stance amid recently improved economic data
  • EUR/USD fell to 1.0535 after the ADP data and remained close to that level late in the day; EUR may find bids at 1.0520 and ~1.0495 where tech support is seen from last week’s low
  • USD/JPY rose to a fresh high in the session at 114.75 as mixed offers and stop-loss buy orders were tripped from 114.20 to 114.50; additional supply is now seen near 114.80
  • USD stalled at tech resistance from last Friday’s high, also at 114.75, after rising above its 55-DMA that had capped the pair since beginning of February
  • The Brazilian real fell as much as ~2% in the session, adding some lift to the USD; losses extended after the Brazil government was said to be considering raising a tax on FX transactions, though the central bank later denied it