Dollar Gains as ADP Suggests Strength Before May Jobs Report

  • Upbeat data augur well for NFP; ISM shows subdued prices
  • Pound climbs above 1.2900, shrugging off poll results

The dollar was on track for its first daily gain this week, bolstered by a private payrolls survey that suggested upside risk to forecasts for Friday’s all-important U.S. employment report.

The greenback briefly pared some gains after a subsequent report suggested price pressures in the U.S. remain subdued. The dollar rose against all of its G-10 peers, gaining the most against the Australian dollar and the yen.

  • Traders in London and New York said flows were muted at the start of the month. Most are keen to keep powder dry ahead of the Friday jobs report. Significant event risk is also seen next week, with a U.K. general election and an ECB policy meeting both taking place June 8, leaving the pound and the euro sensitive to news developments. Former FBI director James Comey is set to testify before a Senate committee on the same day
  • Thursday’s U.S. data included the ADP Institute estimate that private payrolls gained 253k in May vs consensus of 180k. The data leave traders braced for upside risk to the estimate for a 180k print in Friday’s report on May non-farm payrolls, though they are wary after March data showed a strong gain in ADP that wasn’t matched by the government report
  • Traders expect that the ECB will keep rates steady next week, though there’s strong expectation that the bank may shift its language to acknowledge improved economic growth that has come with still subdued inflation. Markit PMI data from Europe painted a mixed picture of economic growth with limited price pressures, leaving the ECB wiggle room to reiterate its previous stance that it will stick to the current policy path until the end of 2017 or beyond
  • EUR/USD fell to a fresh low for the session at 1.1202 after the ADP data, with bids at 1.1190/00 cushioning the drop; the EUR had already fallen back from the session high at 1.1257 after the PMI data left traders unimpressed. Stop-loss sell orders may be in place below 1.1190, a trader in Asia said
  • USD/JPY rose to a fresh high at 111.48 as Treasury yields climbed, with the USD absorbing offers above 111.20 that had capped overnight gains for the greenback. An afternoon rally saw the pair return to the session high area, with flows light in the uptick from ~111.25
  • GBP/USD is trading around 1.2879, earlier climbing above 1.2900 and seeming to shrug off opinion polls showing the race between the Labour and Conservative parties a close call by some measures. Just Wednesday, the pound skidded to below 1.2800 after one study showed the race almost too close to call
  • Weekly initial jobless claims rose to 248k from 235k, while the ISM manufacturing index rose to 54.9, above estimates for a 54.8 reading. Within the ISM report, the prices paid component, a gauge of inflation, fell to 60.5 vs estimates for a smaller drop to 67.0 from April’s 68.5
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