Does ADP Suggest That Fed Will Stay Pat?

Last updated 11/4/2009 8:58 AM ET (GMT -5) 3 Comments

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Boris Schlossberg

Director of Currency Research, GFT

ADP employment report printed at -203K versus forecast of -190K suggesting that the overall NFP number on Friday could come in as high -263K jobs versus current market projections of -175K. The ADP numbers have been notoriously inaccurate understating the actual BLS statistics by more than 103K average over the past five months which indicates that the NFP numbers could be weaker than the market expects and most probably will remain above the psychologically key -200K level.

Nevertheless, given the volatility of ADP data the currency market generally dismisses the release, although all risk currencies rallied in the aftermath of the news on the assumption that the Fed will maintain its ultra accommodative monetary stance in light of the still difficult labor conditions.

Today’s ISM Non Manufacturing report printed weaker than expected at 50.6 versus 50.9 the month prior suggesting that some of the stimulus impact from Q2 may be wearing off on the US economy. Although business activity increased slightly to 55.2 from 55.1 the month prior, the employment component fell more than 3 points ot 41.1 from 43.3 in September.This was the worst reading since May 2009 and suggests that labor conditions remain challenging.

Risk FX rose in the aftermath of the report as currency traders became convinced that Fed will remain stationary given the still troubling labor landscape

Comments (3)

alexjbrandt

November 04, 2009 at 11:24 AM ET

If the Fed remains stationary(which looks like they will), will the EUR/USD and GBP/USD rise as more investors take on risk?

Also, given the past few economic reports of the US economy, why would it motivate traders to take on risk considering that the US economy is not full recovered.

sdg66

November 04, 2009 at 01:01 PM ET

Let's face the truth without engaging ourselves in the self-destructive practice of trying to rationalize ALL MARKET MOVES. If the seesaw between appetite for risk and risk- aversion was iconized by the vacillations of, let's say, the EUR/YEN for the past year, then it's no longer so. The yen was a good proxy for the dollar, and exaggerated, heightened, and dramatized the tug of war between the risk takers and the risk avoiders. The boat was rocky, but there was only one boat out in the rough seas.

The market nowadays seems to suffer from the multiple personality syndrome, and there seems to be too many boats out in the murky waters of the currency market. Many of the interpretations of the market moves cannot be justified over a reasonable stretch of time; just checklist the same EUR/JPY charts against the fundamental news, and you'll see that the subsequent reactions to the news over the past month have been outright ambiguous, unpredictable and pretty random. So, why assume the mantle of a MARKET RATIONALIZER, if the only sane thing we are left to do is to suck our thumbs and grind our teeth at the eccentricities of the market?

milanh-fx

November 04, 2009 at 12:59 PM ET

interest rate move the risk

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.