ADP Employment Report set to show uptick in job growth ahead of Nonfarm Payrolls

ADP Jobs Report to be overshadowed by geopolitical turmoil

There is no clear near-term correlation between the ADP Employment Change report and the Nonfarm Payrolls report, meaning a strong ADP does not guarantee a similarly upbeat NFP. Nevertheless, the figures tend to impact the US Dollar (USD), with better-than-anticipated figures generally boosting demand for the Greenback.

Ahead of the release, the USD is strengthening against all major rivals, but not because of the US economic performance, but because fears took over financial markets after the US and Iran launched a massive air strike on Iran last Saturday. Tehran retaliated, hitting US bases in different Gulf countries such as Dubai, Qatar, and Saudi Arabia. As of today, the conflict continues to spread across the entire Persian Gulf.

The latest on the matter indicates that shipments through the Strait of Hormuz have halted, further fueling price disruptions: Oil and gas prices are skyrocketing around the globe, while demand for safety is pushing the US Dollar Index (DXY) up, roughly 1.7% higher since the week started.

In such a scenario, the US employment situation will likely be set aside as investors will be focused on war developments when looking for market direction. Nevertheless, every piece of data will be considered in the mid-term leading up to the next Fed monetary policy meeting scheduled for March 17-18. At the moment, the odds of an interest rate cut are quite low, particularly given stubborn inflationary pressures. The latest Personal Consumption Expenditures (PCE) Price Index, the Fed’s favorite inflation gauge, came in at 2.9% YoY in December, while the core annual PCE hit 3%.

The February ADP report is expected to confirm that the labor market left behind the slow momentum from mid-2025 and is now much more stable. A stronger-than-anticipated report is likely to reinforce the positive view of the labor market, yet have no real impact on upcoming Fed monetary policy decisions. A weak report, on the other hand, can temporarily interrupt the USD rally, but as long as the war continues, demand for safety is likely to prevail

When will the ADP Report be released, and how could it affect the USD?

The US ADP Employment Change report will be out on Wednesday at 13:15 GMT, and it is expected to show that the private sector added 50K new jobs in February. As previously mentioned, the DXY is sharply up ahead of the announcement amid the Middle East crisis, boosting demand for safety.

Valeria Bednarik, Chief Analyst at FXStreet, notes: “Demand for the USD pushed the DXY to its highest since mid-January, when the index topped at 99.50. The bullish trend is clear on the daily chart, as the DXY has run beyond its 100-day and 200-day Simple Moving Averages (SMAs), both directionless and converging at the 98.40-98.60 price zone. The same chart shows technical indicators head firmly north, well into positive territory, without signs of upward exhaustion.”

Bednarik adds: “Beyond the aforementioned yearly high at 99.50, the index is likely to extend its run towards the 100.00 mark. Additional gains seem unlikely with just the ADP report, but steady gains above 100.00 should lead to a long-lasting USD bullish trend. Support comes at the 90.00 level, with approaches to the latest likely to attract buyers. An unlikely break below it should expose the mentioned 98.50 area, where the next line of buyers will appear.”

Fed FAQs

What does the Federal Reserve do, how does it impact the US Dollar?

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

How often does the Fed hold monetary policy meetings?

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

What is Quantitative Easing (QE) and how does it impact USD?

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

What is Quantitative Tightening (QT) and how does it impact the US Dollar?

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.

Economic Indicator

ADP Employment Change

The ADP Employment Change is a gauge of employment in the private sector released by the largest payroll processor in the US, Automatic Data Processing Inc. It measures the change in the number of people privately employed in the US. Generally speaking, a rise in the indicator has positive implications for consumer spending and is stimulative of economic growth. So a high reading is traditionally seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.

Why it matters to traders?

Traders often consider employment figures from ADP, America’s largest payrolls provider, report as the harbinger of the Bureau of Labor Statistics release on Nonfarm Payrolls (usually published two days later), because of the correlation between the two. The overlaying of both series is quite high, but on individual months, the discrepancy can be substantial. Another reason FX traders follow this report is the same as with the NFP – a persistent vigorous growth in employment figures increases inflationary pressures, and with it, the likelihood that the Fed will raise interest rates. Actual figures beating consensus tend to be USD bullish.

FXStreet

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