ADP Shocks the Market
01/07/2009 10:37 am EST
ADP Employer Services gauge showed a shocking -693K contraction in employment versus estimates of -495K in job losses. The news sent the dollar tumbling against the euro, with the pair hitting 1.3737 in post-release trading. The ADP figures confirmed the dollar bears’ worst nightmares, nearly hitting the -700K barrier and suggesting that the US labor situation has deteriorated significantly over the past month.
Although the ADP numbers can be notoriously unreliable in forecasting NFP results, the survey tends to be a generally good predictor of the severity of job losses. To that end, if this Friday’s non-farm payrolls do confirm the ADP result, the dollar could see some additional weakness.
However, given the negative sentiment already prevailing in the currency market, any reading close to -500K could be seen as dollar positive, and the greenback could actually gain as a result. For the time being, however, dollar bearish sentiment clearly reigns as the currency markets absorb the negative economic surprise and await Friday’s data.
By Boris Schlossberg of GFTForex.com