USD: ADP more important than usual - ING

We noted yesterday that the slump in long-dated global bonds was unlikely to sustain dollar strength. That's proven true - the dollar has given back some gains, and focus has shifted back to the data, ING's FX analyst Francesco Pesole notes.

Markets may not be ready to take rate expectations much lower

"Yesterday's US JOLTS figures confirmed the labour market is loosening. While job openings fell more than expected to 7.2 million, it's the uptick in layoffs to 1.8 million that's more concerning. Meanwhile, a low quit rate continues to signal wage moderation."

"Expect no less interest in ADP payroll figures today, for two reasons. First, after official employment revisions, it appears that ADP data did have some decent predictive power for payrolls. Second, the Fed's hawkish dissenter (and Chair front-runner) Christopher Waller said the weekly reports received from ADP showed continued deterioration. Consensus is for a slowdown from 104k to 68k today."

"There is a risk that if ADP data points down, and payrolls surprise on the upside, markets might raise some doubts on the latter. The key question is whether the markets are ready to take rate expectations much lower. We acknowledge that the bar may be a bit higher for another major dovish repricing before the CPI data (11 September), but the dollar appears expensive relative to its short-term rates, and we believe it has more room to fall into tomorrow's jobs report."