The focal point today is the National Employment Report from ADP payroll processor. This report is considered a preview of the official nonfarm payrolls from the US Labor Department which are due this Friday.
Importantly, the Federal Reserve and market participants around the world are closely monitoring the situation in the US labor market as well as growing inflationary pressure. The US regulator is keeping close tabs on these two crucial aspects. Fed officials reckon these criteria will mirror the dynamic of the US economic recovery.
ADP experts project that the national economy created 800,000 jobs in April, excluding farm employees, against 517,000 in March. If this data is confirmed in the government report, it will be the most robust hiring over the recent 12 months.
How financial markets could respond to such positive news? Commonly, upbeat employment data supports the US dollar, though its growth is likely to be subdued this time. Why? The official nonfarm payrolls are due this Friday. The data could be not so optimistic as it happened a few times earlier. Still, the market has high expectations for employment data in April. Besides, the global headwind for the US dollar remains the same. Indeed, the US Federal Reserve has pumped up financial markets with the a humongous amount of the US currency that makes the greenback the funding currency. Recently, the US dollar finds solid support from rising yields of US Treasuries. Hence, the US debt market will send yields of Treasuries soaring in response to upbeat employment data. These factors will be certainly bullish for the US dollar. Time will show how strong the greenback's support is.
All in all, there are no reasons for changes in the fundamental background. Fresh evidence of improvement in the US labor market will set the market in motion for a while. A further trend will largely depend on economic data and the Fed's agenda for tightening monetary policy and tapering the bond-buying program. When it comes for the Fed's rhetoric, this does not benefit the US dollar. Fed officials reiterate that the regulator is monitoring economic conditions so that monetary policy could be adjusted anytime. Such rhetoric is not something important to determine market sentiment. The Fed just moderates demand for dollar-denominated assets.
Intraday forecast
EUR/USD is hovering at support of 1.2000. If ADP data is better than expected, the support will be broken and the price could decline to 1.1940.
USD/JPY is trading at the level above 109.25. If ADP data is bullish for the US dollar, the currency pair will surge to 110.00.
