Private employment grew less than expected in April, perhaps setting the stage for a weaker than anticipated non-farm payrolls report on Friday, sending the euro through 1.1250 and then 1.1300, the highest the united currency has been against the dollar since February 26th.
The payroll company ADP reported 169,000 new positions in its monthly survey, less than the 200,000 forecast by economists and revised the prior month's total down to 175,000 from 189,000.
The euro reacted immediately to the report rising from 1.1223 just before the 8:15 am release to 1.1268 within a minute and commencing a steady climb that reached 1.1367 by 10:15 am.
The Federal Reserve has been publically considering whether to increase its benchmark Fed Funds rate from 0.25 percent for the first time in more than six years. Chair Janet Yellen and other officials have stated repeatedly that their focus is on the economic data, particularly the labor market information. If the weakness of March in the NFP continues into April it will eliminate the possibility of a June rate hike and will begin to diminish the potential for one in September. The next policy meeting of the FOMC is June 16th and 17th.
While polling a different and smaller data base that than used by the Labor Department, the ADP survey is often seen as an indicator for the nationwide Employment Situation Report that will be released on Friday at 8:30 am.
Last month the ADP report was also considerably weaker than predicted coming in at 189,000 on predictions for 225,000 and the NFP followed suit at 126,000, barely half the 245,000 forecast. For April 230,000 new jobs have been forecast by economist in the Bloomberg survey.
In general the relationship between the two surveys has tightened since ADP revised their work several years ago to more closely reflect the government’s efforts but the directional bond is still closer than the amount.
Chief Market Strategist
WorldWideMarkets Online Trading
ADP & NFP