- Dollar index rose by more than 70 basis points after ADP released better-than-expected payrolls data.
- The dollar will be in focus tomorrow when the Labour Department releases jobless claims data.
- The data from ADP tends to differ significantly from the official numbers, which will be released on Friday
The US dollar index rose today after ADP released disappointing nonfarm private payrolls data for March. The report showed that private sector employers slashed about 27,000 people from their payrolls. This was the worst data since September 2010, when employers slashed more than 39k jobs. Still, the number was better than the 150k that Economists surveyed by Refinitiv were expecting.
US nonfarm private payrolls better than expected
According to ADP, the most affected companies were the small and medium-sized organizations that employ less than 50 people. These companies removed about 90k people from their payrolls. This number was offset by a net addition by midsize and large organizations, which added more than 63k jobs.
According to the sector, the service sector was the most affected, having lost more than 18,000. The goods-producing sector lost more than 9,000.
The data comes at a time when the US economy has turned upside down, with many people staying indoors. The number of Americans working at home has increased substantially in the past month.
The nonfarm private payrolls came a day ahead of the jobless claims data, which will be released by the Labour Department. Economists surveyed by Refinitiv expect the number to come at 3.5 million, which will be 200k more than what was released a week ago. As I wrote earlier today, economists at Goldman Sachs and Citi expect the number to be more than 5 million.
The number from ADP also came two days ahead of the official employment data from the Labour Department. Economists expect the data from the government to show that the unemployment rose to 4.0% while the private payrolls dropped by 163k. They also expect the data to show that the economy lost more than 200k jobs.
Problems in the mortgage industry
In addition to the weak employment data, we received disappointing data from the Association of Mortgage Bankers. The numbers showed that mortgage applications to buy a home declined by 11% in the past week. Meanwhile, applications for refinancing climbed by a whopping 26%. The average 30-year mortgage rate declined to 3.47% from the previous 3.82% partly because of the low-interest rates by the Federal Reserve.
These numbers show that the housing sector is facing the worst challenge since the 2008/9 financial crisis, which was caused by a collapse of the housing sector.
Meanwhile, Donald Trump warned that the number of deaths related to Coronavirus could soar to between 100k and 250k. This was a bigger number than the 81k deaths that was forecasted a week ago by a team of Washington University researchers. A death of this magnitude would be a big blow for the country since the total number of confirmed Coronavirus cases stand at about 189k.
Dollar index rises after ADP report
The dollar index rose from an intraday low of $98.95 to a high of $99.63. On the hourly chart, the index is approaching the important resistance level of $99.98. At the same time, volatility, as measured by the Average True Range (ATR) indicator has dropped. This is likely calm before the storm, and I expect the index to show some strong movements in the coming two days.