What to look for in the US Session

The European Session is dull today as we have the Labour Day’s Holiday. Things will get much more interesting in the US Session as we get some key US economic data and then we finish the day with the FOMC rate decision. Let’s break down the upcoming data releases and see what could be the likely market impact.

• US ADP 12:15 GMT (08:15 ET)

The US ADP is expected at 175K vs. 184K prior. Last month, the data surprised to the upside with the biggest increase in hiring in eight months. The worrying part was the change in annual pay which showed an unchanged 5.1% rate for job stayers and a big jump to 10.1% vs. 7.6% prior for job changers. The problem here is that a resilient labour market with rising wage growth could not only stop the disinflationary trend but even reverse it. This is something that the Fed will want to avoid. Therefore, watch out for the pay gains data today as an upside surprise could fuel another hawkish reaction from the market with more buying momentum for the USD across the board and more downside for bonds, stocks and gold.

• US ISM Manufacturing PMI 14:00 GMT (10:00 ET)

The US ISM Manufacturing PMI is expected
to tick lower to 50.1 vs. 50.3 prior. Last
month, the index jumped into expansion for
the first time after 16 consecutive months in contraction with generally upbeat
commentary. The latest S&P
Global US Manufacturing PMI returned back
into contraction after the Q1 2024 expansion. The commentary this time has
been pretty bleak with even mentions of strong layoff activity, although there
was also good news on the inflation front. The ISM report is generally
considered more important by the market, so it will be used to confirm or
deny the S&P Global result.

If the data surprises to the upside, it will likely trigger a hawkish reaction as the market will brush off completely some latent worries from the S&P Global survey and lead to more bids for the USD and offers for bonds, stocks and gold. Conversely, if the data surprises to the downside, the market might reverse some of the moves seen in the last few days.

• US Job Openings 14:00 GMT (10:00 ET)

The US Job Openings is expected at 8.680M
vs. 8.756M prior. This will be the first major US labour market report of
the week and, although it’s old (March data), it’s generally a market
moving release. The last
report we got a slight beat with negative
revisions to the prior readings highlighting a resilient although normalising
labour market. The market will also focus on the hiring and quit rates as they
both fell below the pre-pandemic trend lately. This report will be overshadowed by the ISM Manufacturing PMI but watch out for big surprises as they could exacerbate or even reverse the moves from the ISM release.