Some optimism going into the jobs report but ADP keeps traders on their toes

Eurozone inflation data gave investors cause for optimism today while the US ADP report may make some people nervous ahead of tomorrow’s jobs data.

A rare positive surprise from eurozone inflation data

We had a rare positive inflation surprise today, with both headline and core eurozone HICP releases coming in much lower than expected. While energy was largely behind the decline in the headline rate – as it has been since it peaked in October – services inflation moderated last month, with the launch of subsidized public transport in Germany weighing on transport services prices.

This will still be seen as progress though and if we see further signs over the coming months, the ECB should feel comfortable enough to bring the tightening cycle to an end, in line with market expectations. Base effects may be less favourable on the core side over the next couple of months though which could see the number edge a little higher once more.

Does the ADP point to another strong US labour market report?

It’s probably a good thing that investors have come to distrust the ADP release as an accurate precursor to the NFP, or today’s release may have really spooked investors hoping for a more modest report on Friday. And traders will be hoping that ADP is wildly wrong once more or the Fed may feel it has little choice but to hike rates again this month.

While there have been some steady signs of progress on inflation, the economy has remained very resilient, as has the labour market which has shown barely any signs of weakness. There is an expectation that this will change over the summer but those optimistic beliefs have been proven wrong repeatedly and if ADP does prove even remotely accurate, they may be about to be again.

Will bitcoin test the May lows again?

Bitcoin enjoyed a bit of a recovery last week but appears to have lost its way a little, falling over the last couple of days to trade back below $27,000. The key level below remains $26,000 where it has now found strong support on two occasions over the last month. Below that, $25,000 could offer an interesting test being a big barrier of resistance back in February.

For a look at all of today’s economic events, check out our economic calendar:

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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam