Better Than Expected ADP Employment Report Provides No Support to the Dollar

Market Reviews

US dollar has no support from strong employment data. Still, the dollar is the second strongest one for today, just next to the British pound. US ADP report showed private sector jobs grew 216k in July, above expectation of 186k. Prior month’s figure was also revised up from 177k to 181k. FOMC rate decision is in focus.

The British pound rose, despite the weak data on the PMI manufacturing, while market participants are waiting for the outcome of tomorrow's meeting of the Bank of England. UK PMI manufacturing dropped to 54.0 in July, down from 54.3 and missed expectation of 54.2.

The euro grew moderately after the release of data on business activity in the manufacturing sector of Germany, France and the Eurozone, while investors took a wait-and-see approach ahead of the announcement of the Fed's decision on interest rates. Eurozone manufacturing PMI is finalized at 55.1 in July, unrevised, slightly higher than June’s final reading of 54.9.

German manufacturing PMI was at 56.9 (revised down from 57.3). The activity in the France’s manufacturing sector recovered in July, after a decline at the end of the second quarter. The manufacturing index rose to 53.3 in July from 52.5 recorded in June. The indicator was higher than the preliminary estimate of 53.1.

Japan PMI manufacturing was finalized at 52.3, revised up from 51.6. But the reading was still the lowest in 11 months. China Caixin PMI manufacturing dropped -0.2 to 50.8 in July, down from 51.0, slightly below expectation of 50.9. It’s also the lowest since November 2017.

The Fed is likely to maintain rates unchanged in the 1.75%-2.0% range, and this decision is unlikely to cause a noticeable reaction from the markets. Investors will wait with great attention for the statement of the central bank following the meeting, in which there may be signals about the dynamics of interest rate increase in the future.