FX.co ★ ADP's weak data is unlikely to affect investors' mood

There is also a positive trend in the global stock markets after the US recovery, which is mainly due to the publication of corporate financial statements for the fourth quarter of 2021.

Such moods are inspired by the release of the financial statements of the largest global companies. For example, Alphabet and AMD reported significantly better-than-expected earnings per share and earnings data on February 1, which led to a 9.29% and 10.46% rise in the value of securities on the postmarket, respectively. This news returned to the market with full-fledged optimistic expectations among investors and caused a wave of growth in stock indices both in the Asia-Pacific region, Europe and North America.

Moreover, these positive sentiments could not even affect the values of business activity indices in the manufacturing sector (PMI) of Germany published yesterday – 59.8 points in January against the expected growth of 60.5 points, as they still turned out to be higher than the December value of 58.0 points. In the US, this indicator also showed a decrease to 57.6 points against the December increase to 58.8 points, but the figures were slightly higher than the forecast of 57.5 points.

The markets initially reacted with a decline in stock indices, which was evident in the United States, but then, news from company reporting brought back the good mood to the markets, which caused stock indices to close in the "green" zone.

As for the currency market, the US dollar was under pressure for two consecutive days. The main reason for this was the return of demand for risky assets and the markets' full recovery on the expectation of the first increase in the Fed's interest rates at the March meeting.

Today, investors' attention will be focused on the publication of important economic statistics – the values of consumer inflation in the euro area and the number of new jobs in the US economy in January from the company ADP.

It can be recalled that inflationary pressure is expected to decline to 4.4% from 5.0% in annual terms. If the forecast does not disappoint and both annual and January figures show a downward correction of inflation, this may push the ECB not to raise interest rates in the coming months. Against this background, we should expect the EUR/USD pair to continue declining to the level of 1.1100 or even lower.

Now, the question arises: how will the US dollar and the US stock market react to the weak number of new jobs from ADP? According to the consensus forecast, growth in January is expected to be only 207,000 against the December growth to 807,000.

If the data shows a lower value, the US dollar will locally drop against major currencies except for the yen, but in general, a strong decline is unlikely. Positive news for it is still the high expectations about the first interest rate hike by the Fed at the March meeting. Aside from that, official figures from the US Department of Labor will be presented on Friday, which is very important and can influence the dynamics of the US dollar and markets in general.

To sum up, we believe that the positive mood in the markets should continue today, which will contribute to the growth of demand for company shares and commodity assets.

Forecast for the day:

The EUR/USD pair is trading below the level of 1.1280 while waiting for Eurozone's consumer inflation release. If the data shows a decline, this may lead to the pair's further fall to 1.1195. In turn, the growth of inflationary pressure and, possibly, negative ADP data will support the pair, as the market will increase expectations of an earlier increase in ECB interest rates. This will stimulate the pair's increase to 1.1370.