October job growth expected to slow in ADP Employment Report

• A net gain of 69K jobs in October is expected in the US ADP Employment Change report.
• Only a substantial disappointment in October’s ADP figures is likely to dent confidence in the US economy’s strong momentum.
• With the midterm election outcome dominating attention ahead of Friday’s NFP report, the US Dollar is likely to see only a limited response.

Private-sector job creation is expected to ease to 69K in October from 90K in September, according to the market consensus for the ADP Employment Change report. The Automatic Data Processing (ADP) Research Institute will publish the figures on Wednesday, with forecasts pointing to a moderate slowdown in hiring.

Financial markets scrutinise the ADP figures for indications of what to expect from the pivotal Nonfarm Payrolls (NFP) report, usually published a couple of days afterwards by the US Bureau of Labor Statistics (BLS). This Wednesday, though, attention will also turn to the US ISM Services Purchasing Managers Index (PMI). Above all, markets will be weighing the implications of the Democrats’ victory in the US midterm elections.

ADP Jobs Report expected to signal slower hiring as labour market holds firm 

A run of robust US economic releases has strengthened investor confidence in the outlook ahead of October’s ADP employment figures. Last week’s preliminary Gross Domestic Product (GDP) data put third-quarter growth at an annualised 3.4%, led by consumer spending, investment and government expenditure.

Further evidence of that strength came from Monday’s US ISM Manufacturing PMI: factory activity picked up more than forecast, indicating a solid start to the fourth quarter.

Taken together, these releases reinforce the case for US economic exceptionalism. Alongside strong inflationary pressures, they create ideal conditions for further monetary tightening by the Federal Reserve (Fed). Futures markets assign a 75% probability to another quarter-point rate increase in December, according to the CME FedWatch tool. That prospect is helping the US Dollar Index (DXY) hold relatively steady close to its year-to-date highs. 

In this environment, only a substantial setback in October’s ADP employment figures would be likely to cause significant disruption. Employment rose by 29K in September’s Nonfarm Payrolls report, after a gain of 133K in August. Those figures point to a stabilising labour market, with no clear evidence of deterioration so far.

Nevertheless, the implications of the decisive Democratic victory in the US midterm elections could keep the Greenback on the defensive on Wednesday. ING Analyst Francesco Pesole offers this assessment: “a Democratic sweep (...) could be seen as slightly negative for the US Dollar from a few angles, from higher risk of government shutdown and gridlock on debt ceiling negotiations to potential damage to already shaky AI-related sentiment.” 

US Dollar faces limited impact from Wednesday’s ADP release

Scheduled for Wednesday at 13:15 GMT, the US ADP Employment Change report is forecast to record 69K new private-sector jobs in October. Whatever the final figure, it is unlikely to shift expectations for a December Fed rate rise. The effect on the US Dollar (USD) should therefore be modest, as the midterm election result commands market attention before Friday’s crucial NFP report.

Later on Wednesday, a few hours after ADP, the US ISM Services PMI is forecast to indicate a slight easing in October while remaining at levels that signal expansion and robust activity in the sector. Here too, only markedly disappointing numbers would be likely to undermine market confidence in the US economy’s resilience.

From a technical perspective, the US Dollar Index (DXY) is trading near the bottom of the range established since early October. Its 4-hour chart points to a neutral-to-bearish short-term bias. Below the mid-50 area, the Relative Strength Index (14) suggests little directional conviction, while the Moving Average Convergence Divergence (MACD) histogram stays in negative territory. Together, these indicators suggest mild selling pressure rather than a firmly established downtrend.

FXStreet FX analyst Guillermo Alcalá says a break below support in the 101.50 area, marked by the lows of 22 October and 2 November, would be needed to confirm a change in trend. That would open the way towards the late-September lows between 101.00 and 100.90.

For resistance, Alcalá highlights the 30 October high just above 102.00, followed by the highs of 28 and 29 October around 102.50. Beyond those levels lies the 18-month peak of 102.95, reached in mid-October.