NEWS / Foreign Exchange

Dollar Stability May Turn to Recovery on ADP, ISM

This morning??™s US figures will be dominated by the ADP National Employment Report (8:30 am EST) on private payrolls and the US services ISM (10:0 am EST). The new and improved forecasting methods of the ADP surveys have led the February survey of 57K (from 121K in January) to be in line with the sharp slowdown in the non-farm payrolls to 97K from 146K. The APD survey has had a fairly solid record (about 65%) in predicting the direction of the non-farm payrolls. Therefore, any figure of more than 100-110K in the ADP may foretell a recovery in March payrolls to the 110-130K range from 97K in February.

The 10 am release of the services ISM will be largely scrutinized, with market consensus expecting a rise to 55.0 in March from 54.3 in February. This follows a widely dismal ISM manufacturing survey on Monday. Markets will especially watch the employment component of today??™s ISM for to help determine the services payrolls in Friday??™s labor report. The employment index stood at 53.2, 51.7 and 52.2 in December, January and February respectively. It is worth mentioning that the 3-month average of the services sector in the payrolls report has fallen for the past 2 months, reaching the lowest level in 6 months.

Also at 10 am are February factory orders expected to have edged up 1.8% after a 5.6% decline in January. Orders of durable goods have are also expected to have been revised by as much as 2.0%.

The Reserve bank of Australia's decision to leave rates unchanged at 6.25% came as a surprise to many, driving the Aussie down by more than a full cent to 80.66 before recovering to 81.40. The decision helped cool flows into carry trade plays, but these could be renewed following further retreat in geopolitical risk and improved US data.

EURUSD seen continuing tight ranges

USDJPY resistance remains at 119.20

We do not expect a BoE rate hike tomorrow