USD Outlook: Dollar Holds Strong as ADP Jobs Data Set to Shape Next Move

The U.S. Dollar (USD) remains firm this week as global markets adopt a more defensive tone. While no single factor triggered the cautious sentiment, several potential catalysts are at play — including concerns about market valuations, uncertainty over the Federal Reserve’s easing cycle, and political developments such as the recent election of Zohran Mamdani as mayor of New York.

According to ING’s Chief FX Strategist Chris Turner, market valuations appear stretched. He highlighted that the Shiller CAPE ratio — a key measure of equity valuation — recently climbed above 40, a level last seen during the Dot-Com bubble in 2000.

Dollar Strength Driven by Risk Aversion

The shift toward risk-off positioning has placed pressure on high-beta currencies, while the U.S. Dollar Index (DXY) continues to attract demand. Investors are trimming exposure in emerging markets, favoring safer assets.

In the G10 currency group, pairs with strong equity correlations — such as AUD/JPY and NOK/JPY — have dropped around 2.0%–2.25% this week. Analysts note that the Japanese Yen could become the preferred safe-haven currency, as Japan’s authorities are unlikely to resist a stronger yen. In contrast, Switzerland may act to prevent excessive franc appreciation.

ADP Jobs Report to Guide Dollar’s Next Direction

Market attention now turns to the October ADP employment report, scheduled for release at 14:15 CET. Economists expect a modest gain of +30,000 jobs, following last month’s decline of 32,000.

Why is the dollar bid even as markets pull back? Dive into the data and what to watch next for USD and interest-rates.

This report, once viewed as unreliable, has regained importance since official U.S. jobs data remain limited. A result in line with forecasts would likely keep the USD supported, reinforcing doubts that the Federal Reserve will deliver another rate cut in December. Current market pricing shows a 73% chance of a December rate reduction.

Conversely, a weaker or negative ADP figure could weigh slightly on the dollar and boost risk sentiment, as it might strengthen expectations for another Fed cut.

Key Levels to Watch: DXY Range 96.25–100.25

The ISM Services Index, also due today, remains near the key 50-point threshold. A softer reading could further ease bullish momentum in the dollar.

Analysts at ING expect the DXY to trade near the top of its three-month range between 96.25 and 100.25, depending on upcoming labor data. Confirmation of a slowing U.S. jobs market could ultimately cap the dollar’s strength in the weeks ahead.

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