Weaker ADP Payrolls
The euro sold off on Thursday after a series of worrisome data prints out of the Eurozone, which pointed to weaker economic activity – not just in the periphery but also in Germany. Many indicators registered sharp drops from the previous month, and even though the Eurozone manufacturing PMI only showed a narrow miss at 45.9 (cons. 46.0), it still printed a 34-month low. It seems all the ingredients are in place for a dovish ECB press conference later on Thursday, although ECB President Draghi may also need to be mindful of collective bargaining negotiations over unionized pay which are still ongoing in Germany. Weak economic data prints were not peculiar to the Eurozone either – in the US, the ADP estimate of private sector payrolls also disappointed at only +119k (cons. +170k). USDJPY dropped 20 pips on that. Our US economists note that, in recent months, ADP has been an unreliable indicator of the official change in private payrolls as reported by the Bureau of Labour Statistics (BLS). They have also noticed that, for April data in particular over the past two years, ADP has significantly underestimated the official BLS reading. So, our economists stick to their BLS nonfarm payrolls forecast of +180k (cons. +167k). After three weeks of higher initial jobless claims, Thursday’s update will be even more closely watched than usual – although the ECB press conference which begins at the same time will provide some distraction. Our US economists expect a greater fall in claims than the consensus currently forecasts..
Click here to read the full report: UBS Morning Adviser Asia
UBS Investment Bank