Dollar Rises on ADP Job Data, Pound Rebounds As BoE Haldane Speaks

After better-than-expected economic figures, the dollar and the loonie rose in the early US session. Following the Bank of England’s top economist’s hawkish comments, sterling is intensely watched. Today, the Swiss Franc is the worst-performing currency, followed by New Zealand and Australian Dollars. The dollar has passed the first data test, and attention will now shift to the ISM manufacturing index tomorrow and non-farm payrolls on Friday.

In June, ADP employment in the US increased by 692 thousand, which is higher than expectations of 600 thousand people. By the size of the company, the small business added 215 thousand jobs, medium business – 236 thousand, large business – 240 thousand. By sector, the number of jobs in the production of goods increased by 68 thousand, in the service sector – by 624 thousand.

“The labor market recovery remains robust and June ended a solid second quarter of job growth,” said Nela Richardson, chief economist at ADP. “Although the number of jobs is still almost 7 million below the level that existed before COVID-19, since the beginning of 2021, the increase in jobs has been about 3 million. Service providers, the sector hardest hit, continue to do the hard work by posting the strongest gains on leisure and hospitality. The biggest payoff as factories across the country begins to open at full capacity.”

The chief economist of the Bank of England Andy Haldane said in his speech that by the end of this year inflation in the UK will be “about 4%, not 3%.” “This increases the chances that the high inflation narrative will become a dominant, central expectation rather than a risk.” Inflationary expectations will then “shift up”.

Dollar establishes a new record high

Following the Federal Reserve’s surprise hawkish stance on June 16, the US dollar index rose to its highest level since it lifted off from 90.441.

DXY reached a high of 92.448, its highest level since April 8 of this year. On Wednesday, a combination of solid US data, delta covid flows, hawkish Fed speakers, and expectations for a healthy Nonfarm Payrolls report on Friday helped the dollar retain its strong narrative in financial markets.

The Fed’s Robert Kaplan reiterated his hawkish attitude, saying, “I’d prefer to taper sooner than the end of the year.” This, combined with the fact that Private Payrolls rose steadily in June, placed the US dollar on course for its best month in four and a half years.