The ADP jobs report is expected to show job growth ahead of the release of the Nonfarm Payrolls report

The Automatic Data Processing (ADP) Research Institute will publish its monthly report on job creation in the private sector for February on Wednesday. The so-called ADP Employment Change Report is expected to show that the United States (US) private sector added 50,000 jobs in the month. recent positions, 22 thousand each obtained in January.

As usual, the ADP report will be preceded by the US Bureau of Labor Statistics Nonfarm Payrolls (NFP) report, scheduled for Friday. The latter provides a comprehensive picture of the nation’s employment situation because it takes into account private and government sector jobs and the monthly unemployment rate, which is a key figure for the Federal Reserve (Fed), which bases its decisions on both employment and inflation levels.

The ADP Jobs report will be overshadowed by geopolitical turmoil

There is no clear short-term correlation between the ADP Employment Change Report and the Nonfarm Payrolls Report a sturdy ADP does not guarantee a similarly bullish NFP. Nevertheless, these data tend to weigh on the US dollar (USD), and better-than-expected data generally increases demand for the US dollar.

Ahead of the release, the U.S. dollar is strengthening against all major rivals, not because of U.S. economic performance, but because financial markets have been gripped by concerns after the United States and Iran carried out a massive airstrike on Iran last Saturday. Tehran retaliated by striking US bases in various Gulf countries such as Dubai, Qatar and Saudi Arabia. To this day, the conflict is spreading throughout the Persian Gulf.

The latest information on this matter indicates this deliveries through the Strait of Hormuz were suspendedfurther exacerbating price disruptions: Oil and gas prices are surging around the world, while demand for security is driving the US Dollar Index (DXY) higher, which is about 1.7% higher since the beginning of the week.

In such a scenario, the U.S. employment situation will likely be put on the back burner as investors focus on war developments for market direction. Nevertheless, all data will be considered in the medium term, leading up to the next Fed monetary policy meeting scheduled for March 17-18. At the moment, the chances of an interest rate cut are quite low, especially given the continuing inflationary pressures. The latest Personal Consumption Expenditures (PCE) price index, the Fed’s favorite measure of inflation, hit 2.9% y/y in December, while the underlying annual PCE hit 3%.

The February ADP report is expected to confirm that the labor market has stopped the slowdown from mid-2025 and is now much more stable. A better-than-expected report will probably strengthen the positive assessment of the labor markethowever, they have no real influence on upcoming decisions regarding the Fed’s monetary policy. A frail report, on the other hand, may temporarily halt the dollar’s rally, but as long as the war continues, demands for security are likely to prevail

When will the ADP report be published and what impact may it have on USD?

ADP’s U.S. employment change report will be released on Wednesday at 1:15 p.m. GMT and is expected to show the private sector added 50,000 jobs in February. recent jobs. As mentioned earlier, DXY is rising sharply ahead of the announcement amid the crisis in the Middle East, increasing demand for security.

Valeria Bednarik, Chief Analyst at FXStreet, notes: “USD demand pushed DXY to its highest level since mid-January when the index hit 99.50. The bullish trend is clear on the daily chart as DXY broke above its 100-day and 200-day simple moving averages (SMAs), both non-directional and convergent at the 98.40-98.60 price zone The same chart shows that the technical indicators are trending strongly north, strongly positive, with no signs of exhaustion to the upside.

Bednarik adds: “Beyond the mentioned yearly high at 99.50, the index is likely to extend its run towards 100.00. Additional gains seem unlikely based on the ADP report alone, but continued gains above 100.00 should lead to a long-term bullish USD trend. Support is located at 90.00, and approaches to the final level will likely attract buyers. An unlikely break below should expose the mentioned 98.50 the area where the next round of buyers will appear.”

Fed FAQs

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two missions: achieving price stability and promoting full employment. The basic tool for achieving these goals is adjusting interest rates. When prices rise too swift and inflation exceeds the Fed’s 2% target, the Fed raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US dollar (USD) because it makes the United States a more attractive place for international investors to park their money. When inflation falls below 2% or the unemployment rate becomes too high, the Fed may lower interest rates to encourage borrowing, which will negatively impact the dollar.

The Federal Reserve (Fed) holds eight policy meetings a year, during which the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. Twelve Fed officials attend the FOMC meeting – 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.

In extreme situations, the Federal Reserve may exploit a policy called quantitative easing (QE). QE is the process by which the Fed significantly increases the flow of credit in the gridlocked financial system. This is an unusual policy measure used during crises or when inflation is extremely low. This 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-quality bonds from financial institutions. QE tends to weaken the US dollar.

Quantitative Tightening (QT) is the reverse process of QE, in which the Federal Reserve stops purchasing bonds from financial institutions and does not reinvest capital from the bonds it holds at maturity to purchase recent bonds. This is usually positive for the value of the US dollar.

Economic indicator

ADP employment change

The ADP Employment Index is a measure of private sector employment published by the largest payroll company in the US, Automatic Data Processing Inc. It measures the change in the number of privately employed people in the US. Overall, an augment in the indicator has a positive impact on consumer spending and stimulates economic growth. Thus, a high reading is traditionally seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.