EUR/USD extends losing streak as focus turns to ADP, ISM and Eurozone PMI

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The Euro (EUR) weakens further against the US Dollar (USD) on Tuesday as renewed demand for the Greenback keeps pressure on the pair. At the time of writing, EUR/USD is trading around 1.1481, extending losses for the fifth consecutive day.

The Euro extends losses for the fifth straight day as renewed Greenback demand dominates FX markets.
Fed Chair Powell’s cautious stance boosts the US Dollar as markets scale back December rate-cut expectations.
Focus shifts to the ADP Employment Change and ISM Services PMI in the US, as well as the HCOB Services PMI and September PPI in the Eurozone.

Meanwhile, the US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, trades steadily around 100.20, touching a fresh three-month high.

The Euro’s decline seems largely driven by renewed demand for the Greenback, with little impetus from within the Eurozone. The lack of major economic releases has left the single currency at the mercy of broader US Dollar trends.

Across the Atlantic, traders are paring bets on another interest rate cut at the December meeting after Federal Reserve (Fed) Chair Jerome Powell said last week that a further reduction is “not a foregone conclusion” following the 25-basis-point (bps) interest cut. Powell added that “there’s a growing chorus” within the Committee supporting the idea of skipping a cut ahead.

The shift in expectations has been a key driver behind the recent US Dollar strength, as markets recalibrate for a potentially higher-for-longer policy stance. Still, diverging views among Fed officials on inflation persistence and signs of labor-market softness keep the monetary policy outlook uncertain.

Looking ahead, traders will closely watch the ADP Employment Change and ISM Services Purchasing Manager Index (PMI) reports due Wednesday for fresh cues on the US labor market and service-sector activity. With the ongoing government shutdown delaying official data releases, private-sector indicators have taken on added importance. The ADP report will likely offer early insight into hiring momentum and broader labor market trends. In the Eurozone, attention will turn to the HCOB Services PMI and September Producer Price Index (PPI).

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.