The ADP report showed that the US economy added 41,000 positions. Albeit an improvement from November’s 32,000 contraction, the data fell short of the median estimate of 47,000. The JOLTS job openings report also landed and reported a lower-than-expected number of 7.146 million, easing from October’s downwardly revised reading of 7.449 million. While this suggests that the labour market is cooling, it is not falling off a cliff.
We also received the December US ISM Services PMI report yesterday, which showed the headline number rising to 54.4 from 52.6 in November. This represents its highest level since October 2024 and appears to be underpinned by a sizeable jump in new orders (57.9 versus 52.9).
While impressive and signalling expansion in the US services sector, and despite a jump in the employment sub-index being seen (52.0 versus 48.9), the fact that most of the survey respondents reported conditions as mainly flat, along with lacklustre hiring activity, I cannot help but wonder if services is growing at a slower pace than the headline number suggests.
The USD, however, concluded Wednesday on the front foot, reclaiming key daily resistance on the USD index around 98.58 and closing within striking distance of the 200- and 50-day SMAs, currently trading around the 99.00 handle.
It is worth recalling that ahead of tomorrow’s US jobs report the Fed lowered the target rate three consecutive times at the end of last year to 3.50%-3.75%. As we all know, the Fed remains in a tricky spot: balancing elevated price pressures and a softening jobs market. This places a firm spotlight on the upcoming jobs report, with the current median estimate indicating that the US economy added 60,000 payrolls, down from November’s 64,000. The estimate range is broad at this point, spanning a high of 155,000 and a low of 19,000, suggesting that economists are uncertain heading into this print. In terms of the current forecast distribution, anything above 120,000 and below 25,000 would be enough to considerably jolt the markets. I will have a more detailed preview out tomorrow morning for this release.
For the day ahead, the economic data docket is relatively thin, with only the US weekly jobless report on deck for the week ending 3 January at 1:30 pm GMT. The median estimate suggests claims rose by 210,000 from 199,000 the week prior, with the estimate range between a high of 230,000 and a low of 200,000.
Written by FP Markets Chief Market Analyst Aaron Hill
