ADP points to strong NFP; ECB leak hints at TLTROs

Summary:

  • ADP Employment change: 183k vs 190k exp

  • Large upwards revision to the prior: 300k vs 213k previously

  • Reports ECB will cut outlook “enough to warrant new loans”

 

There are two big events in the coming days which could have a major impact on the EURUSD; with the ECB rate decision tomorrow before Friday’s NFP. In the past hour two fresh developments have gone some way to framing expectations heading into these with some solid US jobs data and leaked reports that the ECB is paving the way for more stimulus. The main event from the US this week is Friday’s NFP report, and the early indications suggest that it could well be another strong release. Coming just 48 hours before the NFP data, the ADP employment change is often seen as a harbinger of what’s to come and the signs are positive with a print of +183k for February. Of these 139k came from the service sector and the remaining from the goods sector.

Despite a narrow miss in the February release, the outlook for the US labour market remains strong, with a sizable upwards revision to the previous month meaning that January was the best month for jobs growth in over 3 years. Source: XTB Macrobond

 

While the reading is down a little on the consensus forecast of +190k, the main takeaway here comes from the revision to the prior reading which now stands at +300k from +213k previously. This large upwards revision means that the January figure is the now highest since 2015 and more than compensates for the narrow miss this month.

 

Turning our attention to the ECB and sources from the bank have been cited by Bloomberg making some interesting comments ahead of the rate decision Thursday at 12:45 (GMT). The ECB are said to announce a cut to their outlook by “enough to warrant new loans” which in other words means the bank will pave the way for further stimulus in the form of TLTROs. The leak also suggests cuts to the inflation projections through 2021 and that the bank will state they see a return to trend growth toward year end.

The EURUSD remains under pressure and the latest news stories have done little to support the market. Price is currently around the 23.6% Fib at 1.1300 of the larger decline seen since the high at the end of January. Source: xStation   

 

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