Bearish ADP leads to low non-farm expectations

Yesterday’s markets

2nd April 2015

  • UK Manufacturing PMI: 54.4
  • US ADP Non-Farm Employment Change: 189k
  • US ISM Manufacturing PMI: 51.5
  • AUD Trade Balance: -1.26B

Yesterday’s docket was packed with economic releases as we were greeted by high tier data released from both the UK and US. Firstly, UK manufacturing PMI expanded for its 23rd consecutive month and grew at its fastest rate in eight months. The bullish performance from the UK’s secondary sector can be contributed to strong domestic demand and a pickup in export orders. The better than expected reading has provided further evidence that the UK economy is in good health as the sector continues to show positive growth led by domestic demand.

US ADP was released yesterday afternoon and the reading signalled that companies in the US added fewer workers in March, keeping staffing levels in line with a recent slowdown in demand. ADP climbed to 189k, the smallest gain since January 2014.  Historically the ADP has been slightly erratic in comparison to the non farms payrolls. Recently the ADP has been accurate in predicting the direction of the all-important non-farm pay roll figure however, the variance between the non-farms and the ADP employment report has ranged from -22K to 126K, meaning that Friday’s number is still up in the air as it is expected at 247K. As a result, volatility around this event combined with low liquidity due to Good Friday could result in heightened Dollar movement.

Adding to the poor data trend of the US was the ISM manufacturing PMI which was also released in the afternoon. ISM manufacturing posted a worse than expected 51.5 as poor weather in the US disrupts the secondary sector in the world’s largest economy.

Today’s markets

1st April 2015

  • UK Construction PMI
  • US Trade Balance
  • US Unemployment Claims
  • Fed Chair Yellen Speaks

Today’s economic calendar will again be dominated by the UK and US as we have the release of UK construction PMI in the morning and the weekly jobless claims figure from the US in the afternoon. Both figures are forecast to worsen on its previous reading.