• ADP data showed private US employment falling 301K in January versus expectations for a 207K gain. 
• The DXY continues to trade at session lows in the 95.80s with the latest data not doing anything to help it rebound. 

Employment in the US private sector fell by 301,000 in January, monthly data published by the Automatic Data Processing (ADP) Research Institute revealed on Wednesday, marking only the second month-on-month drop in employment since April 2020 when the US first went into lockdown. That was a huge miss on consensus economist forecasts for an employment gain of 207,000 and marked a more than 1,000,000 turnaround from December's 776,000 job gain (which ADP had revised lower from 807,000). 

“The labor market recovery took a step back at the start of 2022 due to the effect of the Omicron variant and its significant, though likely temporary, impact to job growth,” said Nela Richardson, chief economist, ADP. “The majority of industry sectors experienced job loss, marking the most recent decline since December 2020. Leisure and hospitality saw the largest setback after substantial gains in fourth-quarter 2021, while small businesses were hit hardest by losses, erasing most of the job gains made in December 2021.”

Market Reaction

The DXY continues to trade close to session lows in the 95.80s area in wake of the latest, much weaker than expected ADP jobs report. The report will likely see economists revising down their forecasts for Friday's official payroll number for January, which is unlikely to help the US dollar, which had already been suffering from position squaring and a paring of Fed tightening bets, rebound. That said, the main focus on Friday is on measures of wage cost pressures and labour market slack rather than the headline NFP number, with Fed officials this week already noting they expect a weak headline number.