US dollar stumbles as ADP employment figures disappoint

The US dollar found itself on the defensive on Wednesday as the latest ADP employment figures printed below expectations.

Meanwhile, the pound is struggling to attract support this morning, with GBP/EUR flat at €1.1628 and GBP/USD muted at $1.3778. GBP/CAD is subdued CA$1.7357, while GBP/AUD and GBP/NZD dip to AU$1.8656 and NZ$1.9453 respectively.

Coming up, will an upbeat initial jobless claims release help the US dollar to recoup some ground today?

What’s been happening?

The US dollar fell back yesterday, in response to the latest ADP employment report, which suggested the US economy only added 374,000 jobs last month, against forecasts for an increase of 613,000.

However, the subsequent release of August’s ISM manufacturing PMI helped to cap these losses, after printing at 59.9, up from 59.5 in July and beating forecasts it would drop to 58.6 as the spread of the Delta variant of the coronavirus hinder economic activity elsewhere.

The euro, meanwhile, got off to a poor start on Wednesday after Germany reported a much sharper-than-expected contraction of retail sales growth in July.

However, the single currency’s strong negative correlation with the US dollar allowed the euro to recoup a good portion of these losses later in the session.

At the same time, the pound traded with modest gains during yesterday’s session after the UK’s latest manufacturing PMI was revised higher.

What’s coming up?

Turning to today’s session, the focus looks to be on the latest US initial jobless claims release.

Their release could send the US dollar higher this afternoon as economists forecast that new claims in the last week of August will have fallen to a new post-pandemic low.

Also, of note to USD investors today will be the latest US factory order figures, which could limit any upside potential in the ‘greenback’ amidst forecasts order growth will have dropped off in July.

In the meantime, the publication of the Eurozone’s latest PPI figures may provide some direction for the euro this morning, with a slowing of producer price growth potentially weakening EUR exchange rates.

Finally in the absence of any notable UK data releases, the main catalyst of movement in the pound may be domestic coronavirus developments, with a continued rise in new cases potentially dampening Sterling sentiment.