Broad-market hopes for more rate cuts from the Fed were pushed further out on Tuesday after US business activity survey results hinted at inflationary pressures still simmering in the background. Key consumer activity metrics as well as a preview of Friday’s upcoming US NFP jobs data dump will feature on Wednesday.
Here’s what you need to know heading into Wednesday, January 8:
The US Dollar Index (DXY) caught a risk-off bid on Tuesday, bolstered by safe haven flows after US ISM Services PMI figures widely outpaced median market forecasts. With US price pressures still running on the too-hot side and threatening to keep inflation at a higher level than investors have been hoping, the too-good print clipped market sentiment. Coming up on Wednesday, US ADP Employment Change numbers in December will serve as a potential, albeit volatile and untrustworthy, preview of Friday’s NFP jobs print. The Federal Reserve’s (Fed) latest Meeting Minutes will also be released tomorrow.
EUR/USD bullish momentum evaporated on Tuesday, with Fiber falling back below the 1.4000 handle as the Euro continues to struggle to develop bullish momentum. German Retail Sales, alongside pan-European Produce Price Index figures (PPI), will be the key figures to watch on Wednesday.
AUD/USD Went nowhere quickly on Tuesday, testing the high end but remaining hobbled just south of the 0.6300 handle. Monthly Australian Consumer Price Index (CPI) inflation will be releasing early in Wednesday’s Antipodean market segment, and investors are looking for a slight uptick.
USD/JPY continues to grind its way back toward the 160.00 handle as markets bid the Greenback up further. Most of the gains from the Japanese Yen’s technical recovery in 2024 have been fully pared away, and USD/JPY could be knocking on fresh multi-decade highs in short order. Japanese Labor Cash Earnings for the year ended November are expected late Wednesday or early Thursday, and are expected to accelerate slightly, helping to apply pressure to the Bank of Japan (BoJ) to finally increase interest rates.
Economic Indicator
ADP Employment Change
The ADP Employment Change is a gauge of employment in the private sector released by the largest payroll processor in the US, Automatic Data Processing Inc. It measures the change in the number of people privately employed in the US. Generally speaking, a rise in the indicator has positive implications for consumer spending and is stimulative of economic growth. So a high reading is traditionally seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.
Read more.Next release: Wed Jan 08, 2025 13:15
Frequency: Monthly
Consensus: 140K
Previous: 146K
Source: ADP Research Institute
Traders often consider employment figures from ADP, America’s largest payrolls provider, report as the harbinger of the Bureau of Labor Statistics release on Nonfarm Payrolls (usually published two days later), because of the correlation between the two. The overlaying of both series is quite high, but on individual months, the discrepancy can be substantial. Another reason FX traders follow this report is the same as with the NFP – a persistent vigorous growth in employment figures increases inflationary pressures, and with it, the likelihood that the Fed will raise interest rates. Actual figures beating consensus tend to be USD bullish.
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