- ADP is expected to report an increase of 525K private-sector jobs in November.
- Fears about the Omicron variant keep the dollar bid.
- Robust hiring is set to boost the greenback as well.
Three steps forward, one step back – that has been the path of the dollar, especially against commodity currencies, since the world became aware of the Omicron covid variant. Investors seek the greenback as a safe-haven currency. The first significant release after Omicron came to light could set another move higher. Regardless of the outcome.
As America's largest payrolls provider, ADP has a gauge on the labor market – and therefore it impacts markets even if the figures are poorly correlated with the official Nonfarm Payrolls data. In turn, the NFP is critical for the Federal Reserve's decision to accelerate the pace of its tapering.
The Fed embarked on a gradual reduction of its $120 billion/month bond-buying scheme, which is currently set to end by mid-2022. It could finish it ahead of schedule due to a vibrant labor market and higher inflation.
Expectations stand at an increase of 525,000 private-sector jobs in November, a decrease from 571,000 reported In October. However, ADP & NFP data have not beaten expectations three times in a row since March. That means it could disappoint this time around too.
Win-win for the dollar
Hiring has picked up in America in October, and the trend could continue in November. Hiring toward the holidays is substantial, perhaps even more than usual. Americans have more money to spend than before.
If ADP's data shows hiring at around October's 571,000 or above 600,000, it could boost the dollar. Investors would see it as another confirmation that the Federal Reserve would accelerate the pace of tapering its bond-buying in December. Fed Chair Jerome Powell already opened the door to such a move – but markets are never sure.
Conversely, if private payrolls rise by less than 500,000, it could also be positive for the greenback. Why? Markets would think that if America's labor market stalled even before Omicron became known to the world, it would suffer a greater shock. The adage "When America sneezes, the world catches a cold" is relevant now when the world is coping with the new variant.
It is hard to say if ADP's private-sector jobs report could exceed or come short of estimates. However, the current market environment points to a case where the dollar could advance. Moreover, as the official Nonfarm Payrolls report is published early in the month – on Friday, December 3 – the ISM Services PMI is released only after the NFP, making ADP a more important hint.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.