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USD mixed as ISM beats ADP disappoints

4:36 PM December 6, 2018


  • ISM non-manufacturing PMI 60.7 vs 59.1

  • ADP employment change: 179k vs 195k prior

  • USD pares early gains as yields drop and Gold looks to break higher


The latest look at the US service sector has provided some good news with the ISM index rising to 60.7 against an expected 59.0. This marked a slight increase on the previous reading of 60.3 and given that the forecast was for a drop this is no doubt a good number. With employment coming to the fore of traders minds the subcomponent of this release that relates to jobs was disappointing with a reading of 58.4 vs 59.7 previously.   

The ISM non-manufacturing PMI for November beat forecasts and remains at elevated levels compared to the past five year. Source: Bloomberg


This month’s ADP release was delayed by a day as the US remembered former president George H.W. Bush, meaning the data was released just over 24 hours before tomorrow’s NFP report. A reading of 179k for the month of November was below the 195k expected and marked a fair size drop on the 225k seen for the previous month (this October number was revised slightly lower from 227k previously). The miss is the second lowest in the last 5 releases and now means that 2 of the past 4 figures for this data point have come in below forecast.

The ADP and NFP releases have typically exhibited a pretty strong positive correlation and today’s miss could weigh on expectations heading into tomorrow’s NFP report. Source: xStation


Looking into today’s release in more detail the jobs added were 16k in the goods sector and 163k in services. More importantly, the ADP stated that while US job growth is strong it has likely peaked. "Although the labor market performed well, job growth decelerated slightly,"said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. "Midsized businesses added nearly 70 percent of all jobs this month.This growth points to the midsized businesses' ability to provide stronger wages and benefits. It also suggests they could be more insulated from the global challenges large enterprises face."

In terms of market reaction the US dollar has dropped back in the last couple of hours after making a push higher earlier on. There are large gains seen in the buck against the South African Rand and Brazilian Real whereas the biggest declines are unsurprisingly against perceived safe haven currencies such as the Japanese Yen and Swiss Franc. Overall the greenback isn’t experiencing too big a move in one direction and may be biding it’s time to see how the stock market rout fares and what the upcoming NFP delivers.

The USD is little changed on the day with the buck gaining against EM currenices but falling back against safe havens. Source: xStation  


The risk-off moves are causing US yields to decline with the TNOTE on xStation rising to its highest level since August. The market is now back in the region from around 120.70-121.35 that has provided a ceiling for much of the year since February after three days of large gains. Bonds typically move more slowly than other asset classes and in the knowledge of this, the latest moves have actually been pretty large.

The TNOTE has moved firmly higher in the past 3 days as stock indices have come under pressure causing US yields to fall. Source: xStation


Gold exhibits several of the same characteristics as the TNOTE but is a far more volatile asset class and this market has also been gaining in recent days. The moves so far have been fairly subdued but if the rout in stocks worsens then we could quickly see a swift push higher in the precious metal. Gold has reached its highest level since July this afternoon and the market is looking to make a break higher after a couple months of consolidation.

Gold is looking to break higher with price near a 5-month high as falling US yields in risk-off flows support a push higher in the precious metal. Source; xStation



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