The ADP non-farm payrolls came in at a much better-than-expected 230,000 (vs 214,000). This really ramped up expectations heading into Friday’s official payrolls reading, where 229,000 jobs are expected to be added. Expected average hourly earnings are up 0.2% and this will be key, as it has a bearing on inflation.
The overall impact was further USD strength, with EUR/USD reversing recent gains and dropping below $1.2500 yet again. At the same time, USD/JPY jumped to a fresh six-year high and traded up to ¥114.86. The BoJ will be absolutely loving this and traders are likely to continue looking to buy the dips.
Market looking for credible numbers
AUD/USD was smashed lower heading into today’s jobs data with the pair breaking through October lows and trading lower to $0.8565. This is the pair’s lowest level since July 2010, leaving it extremely vulnerable. The market is expecting 20,000 jobs added for October with unemployment at 6.2%.
However, following the ABS’ changes to its methodology, these numbers could go either way at the moment. I think more than anything else, the market just wants to see a credible reading today. As a result, it’s really hard to tell how the AUD will react. Additionally, pressure continues to mount from falling metals prices. I feel any rallies back into October lows around the $0.8640 region will be used as an opportunity for fresh shorts.