(02 AUGUST 2017)DAILY MARKET BRIEF 2:High expectations for the US ADP data

Today we get US labor ADP data ahead of the NFP report on Friday. Bloomberg Survey indicates new jobs creation for July of 190k compared to the prior June read of 158k. The overall sentiment is positive and it has been 7 years that the data print positive. There is the widespread idea that the US economy is recovering. However we rather believe that the US economy is stalling. GDP growth, is by the way in its second-worst year since 1959. On top of that credit demand is contracting which should weigh on growth and tax receipts are negative.

This is why traders will clearly have the downside risks in the back of their minds. While ADP has had a history of spectacular misses for predicting NFPs over the past months, ADP has often been a pretty accurate forecast for the NFP change.

We suspect that ADP is likely to print below the current expectations. A poor labor read will keep adding downside pressures on the greenback lower, and fuel the main country equity indexes as a US weak economy will push away Fed rate-tightening policy discussion. We think that the EURUSD is heading towards 1.20.

By Peter Rosenstreich