Even though a solid ADP number doesn’t necessarily predict a strong NFP read, the ADP report has a certain influence on the
sentiment before the monthly NFP release, and that sentiment is positive this month.
But the bigger picture tells a different story.
This month, the US companies announced the highest job cuts since February last year. Technology companies led cuts, followed by retailers
and industrial goods manufacturers. Bankruptcies and financial difficulties due to tough economic conditions costed in average 50’000
jobs to the US economy every month last year.
Whether the conditions would improve with the US- China trade truce is yet to be seen. Companies
will certainly feel the pinch of the slowing activity in China due to the coronavirus. And China may have some difficulties fulfilling the
US’ phase-one demands amid the coronavirus shock on its economy. Therefore, and with the best of intentions, the deal may not go according to
the initial plan, even though US Treasury Secretary Mnuchin sounds optimistic that China would live up to the expectations.
Back to
jobs data, an encouraging NFP print today could enhance the actual rally in the US dollar and the US yields, while a soft figure could call for a
correction in US dollar before the end of the week. The 98 mark should give support to the US dollar index, unless we see a surprisingly low read
below the 100K.
By Ipek Ozkardeskaya
