Employment in the United States’ private sector rose 54,000 in August and annual pay was up 4.4%, the monthly report published by the Automatic Data Processing (ADP) showed on Thursday. This reading followed a 106,000 (revised from 104,000) increase recorded in July and came in below the market expectation of 65,000.
Assessing the report’s findings, ““the year started with strong job growth, but that momentum has been whipsawed by uncertainty,” said Dr. Nela Richardson, chief economist, ADP. “A variety of things could explain the hiring slowdown, including labor shortages, skittish consumers, and AI disruptions.”
Market reaction to ADP employment data
This data failed to trigger a noticeable market reaction. At the time of press, the US Dollar Index was up 0.1% on the day at 98.25.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.39% | 0.44% | 0.83% | 0.60% | 0.43% | 0.58% | 0.70% | |
| EUR | -0.39% | 0.05% | 0.40% | 0.22% | 0.04% | 0.19% | 0.31% | |
| GBP | -0.44% | -0.05% | 0.24% | 0.17% | -0.01% | 0.15% | 0.31% | |
| JPY | -0.83% | -0.40% | -0.24% | -0.18% | -0.40% | -0.22% | -0.11% | |
| CAD | -0.60% | -0.22% | -0.17% | 0.18% | -0.15% | -0.03% | 0.14% | |
| AUD | -0.43% | -0.04% | 0.01% | 0.40% | 0.15% | 0.16% | 0.32% | |
| NZD | -0.58% | -0.19% | -0.15% | 0.22% | 0.03% | -0.16% | 0.17% | |
| CHF | -0.70% | -0.31% | -0.31% | 0.11% | -0.14% | -0.32% | -0.17% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
This section below was published as a preview of the US ADP Employment Change data at 06:00 GMT.
- The ADP and NFP reports will serve as indicators of US employment this week, the canary in the cage for the Fed’s policy.
- The US private sector is expected to have added 68K new payrolls in August.
- The US Dollar struggles at the lower end of August’s trading range.
This week, the US employment is set to take centre stage. Automatic Data Processing Inc. (ADP), the largest payroll processor in the US, is set to release the ADP Employment Change report for August, measuring the change in the number of people privately employed in the US, at 12:15 GMT on Thursday.
Investors will be especially attentive to August’s ADP job report, after July’s Nonfarm Payrolls (NFP) shock that triggered the ousting of a key Labour Department official and sent the US Dollar (USD) into a tailspin.
August’s figures will also be crucial to determine the Federal Reserve’s (Fed) monetary policy, as it will be the last employment report ahead of the September 16 and 17 meeting
These figures come in a context of escalating attacks from US President Donald Trump on the Federal Reserve, calling for less restrictive interest rates, as traders ramp up their bets for a resumption of the Fed’s easing cycle in September.
The ADP survey is typically published a few days before the official Nonfarm Payrolls data are released. It is frequently viewed as an early indicator of potential trends that may be reflected in the Bureau of Labor Statistics (BLS) employment report. However, the two reports do not always align.
Chart from Automatic Data Processing
Labour data might confirm a Fed rate cut in September
Employment serves as a fundamental element of the Fed’s dual mandate, in conjunction with keeping price stability.
In that sense, the unexpectedly weak job data seen in July boosted speculation about downside risks to the economy and forced the central bank to shift its focus away from the inflationary risks of Trump’s tariffs.
The poor employment gain seen in July, coupled with sharp downward revisions of the previous two months’ release in the NFP, rattled markets, shattering the theory of US economic exceptionalism and forcing the Federal Reserve to reconsider its hawkish stance.
US inflation figures seen over the previous week have contributed to easing concerns about escalating price pressures, at least for now, and Fed President Jerome Powell accepted the idea of a one-off impact from trade tariffs. A significant change of tone that strengthened the case for immediate interest rate cuts.
Another Consumer Prices Index (CPI) report is due ahead of this month’s Federal Open Market Committee (FOMC) meeting, but further signs of a weakening labour market might practically confirm a Fed cut at the next meeting.
The CME Group’s Fed Watch Tool is showing a nearly 90% chance of a 25 basis point cut this month, ahead of the release of US employment numbers, and at least another quarter point cut before the end of the year.
When will the ADP report be released, and how could it affect the US Dollar Index?
The ADP Employment Change report for August is set to be released on Thursday at 12:15 GMT. The market consensus points to 68K new jobs following a 104K increase in July. The US Dollar Index (DXY), which measures the value of the Greenback against the world’s most traded currencies, is moving up from four-week lows, but remains well below the levels seen before the release of July’s employment figures
Against this background, the risk is on a weaker-than-expected reading, which would force the Fed to accelerate its easing cycle and bring the possibility of a 50-basis-point cut to the table, triggering fresh selling pressure on the US Dollar.
An upbeat result, on the contrary, would ease concerns about a sharp economic slowdown, but is unlikely to alter expectations about Fed easing, at least until Thursday’s figures are confirmed by Friday’s NFP report. Such an outcome is likely to have a moderate positive impact on the USD.
Regarding the EUR/USD, Guillermo Alcala, FX analyst at FXstreet, sees the pair looking for direction within the last 150-pip horizontal range that has contained price action since early August.
Alcalá sees an important resistance area ahead of 1.1740: “The confluence between the descending trendline resistance, now around 1.1730, and 1.1740, which encompasses the peaks of August 13 and 22, as well as Monday’s high, is likely to pose a serious challenge for bulls.”
To the downside, Alcalá highlights the support area above 1.1575: “Euro bears are likely to face significant support at the bottom of the monthly range, between 1.1575 and 1.1590, which capped bears on August 11, 22, and 27. Further down, the 50% Fibonacci retracement level of the early August bullish run, at 1.1560, might provide some support ahead of the August 5 low, near 1.1530.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022.
Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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