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Strong ADP but weak correlation to NFP

Market Analysis

EURUSD, H1

U.S. ADP reported private payrolls increased 234k in January from a revised 242k gain in December (was revised down from 250k). The service sector added 212k and the goods sector rose 22k. In the former, trade/transport rose 51k and helped pace the headline gain. Education and health added 47k, while employment in leisure and hospitality increased 46k. For the goods sector, manufacturing was up 12k and construction rose 9k. The headline is stronger than expected and is likely to limit any further declines in Treasury yields, but the report doesn’t really correlate strongly with the monthly Non-Farm Payroll (NFP) figure which is due Friday. The Reuters Poll has a consensus for NFP to be 180K.  The “as reported” ADP figures have overshot private payrolls in every month since the methodology change of October 2016 except April, June, and November of 2017, leaving an average overshoot of 44k and an average monthly 2017 gain of a solid 212k, versus 168k for NFP private payrolls.

The dollar edged up after the better ADP jobs number, taking EURUSD down a few points to 1.2448 before recovering to 1.2466.

 

 

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Stuart Cowell

Senior Market Analyst

HotForex

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