EUR/USD drops on ADP employment report

iNVEZZ.com: Wednesday, July 2: The US currency advanced 0.26 percent to $1.3653 versus the euro as of 14:02 BST as a private report indicated the US economy added more jobs than anticipated in June. The pair hit $1.37 yesterday, its strongest level since May 21. The euro has gained more than one percent in two weeks, which might be problematic for the European Central Bank (ECB), as Mario Draghi recently warned a strong euro amid low inflation was cause for concern.

For further direction, traders are looking to a speech by Federal Reserve Chair Janet Yellen at the International Monetary Fund (IMF) in Washington today at 16:00 BST, and the ECB’s press conference at 13:30 BST tomorrow.
Yellen’s recent dovish comments caused market participants to reduce wagers on the dollar appreciating. “At the time Yellen seemed determined to give as little support as possible to rate hike speculation,” Esther Reichelt, currency strategist at Commerzbank, told Reuters. “This is unlikely to be any different today. But the market is waiting for Fed signals and therefore already small hints can be sufficient to affect the dollar,” she argued.

The Bloomberg Dollar Spot Index (BBDXY) declined for a fifth day yesterday after a report indicated US manufacturing grew by less than analysts had predicted. However, the BBDXY was up 0.19 percent at 1,004.55 as of 14:10 BST today. As of press time, the ICE USD Dollar Index (DXY), which averages the weight of fewer currencies against the dollar than the BBDXY, had advanced by 0.2 percent to 79.96 – 0.22 percent below its 200-day moving average.

“The market is just trying to weigh up what’s going to come out,” Jane Foley, senior currency strategist at Rabobank International in London, told Bloomberg. “Given the euro-dollar exchange rate’s importance for the disinflationary risk, there is some anticipation that Draghi will be dovish. Janet Yellen is, of course, due to speak. There is the opportunity for her to answer a question on monetary policy and potentially re-establish her dovish theme,” he added.

“The U.S. data has been weakening somewhat, and that is accelerating dollar selling,” Yuki Sakasai, a foreign-exchange strategist at Barclays in New York, told the New York-based news agency today. “We need some hawkish signals from the Fed to change that trend,” he said.
ADP released its National Employment Report for the US today at 13:15 BST. It showed private sector employment in the world’s biggest economy increased by 281,000 jobs from May to June. This came ahead of the official monthly Employment Situation Summary by the US Bureau of Labor Statistics which is due tomorrow at 13:30 BST. The median estimate of 89 economists polled by Bloomberg points to a 215,000 increase in nonfarm payrolls.