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FOREX-Dollar slides after softer-than-expected U.S. private sector jobs data
July 6, 2017 / 2:33 PM / 2 months ago

FOREX-Dollar slides after softer-than-expected U.S. private sector jobs data

(Recasts, updates prices, adds comment, changes byline, dateline; previous LONDON)

* ADP data shows 158,000 U.S. private sector jobs added

* U.S. weekly jobless claims rise in latest week

* U.S. services sector index rises

* Euro finds support as bond yields rise after ECB minutes

By Gertrude Chavez-Dreyfuss

NEW YORK, July 6 (Reuters) - The dollar fell on Thursday after a round of weaker-than-expected U.S. labor market data, affirming a gradual pace for raising interest rates by the Federal Reserve.

The greenback was already on the defensive after Wednesday’s issue of the Fed’s policy minutes failed to provide a clear picture of future interest rate increases. The slide extended with Thursday’s poor set of U.S. economic data.

The ADP National Employment Report showed private sector payrolls increased by 158,000 jobs last month, lower than the 230,000 positions created in May and below economists’ expectations for a gain of 185,000.

In a separate report, the Labor Department said initial claims for state unemployment benefits increased 4,000 to a seasonally-adjusted 248,000 for the week ended July 1. It was the third straight weekly increase in claims.

“The slightly weaker-than-expected ADP figures added to the dollar’s heavier tone this morning and raised some concerns about a downside surprise to tomorrow’s broader non-farm payrolls report,” said Omer Esiner, chief market analyst at Commonwealth FX in Washington.

Wall Street economists predicted U.S. non-farm payrolls to grow by 179,000 in June, according to a Reuters poll. In May, the U.S. economy created 138,000 jobs.

Daniel Silver, an economist at JP Morgan in New York, noted however that if the ADP figures were correct, the pace of job growth has likely remained above that needed to keep the unemployment rate steady over time.

The U.S. services sector index was also released on Thursday, showing an index of 57.4 in June, compared with a forecast of 56.5. The employment index, however, fell to 55.8, compared with 57.8 in May, suggesting a cooling labor market.

On Wednesday, the latest Fed minutes showed that policymakers were split on the outlook for inflation and how it might affect the future pace of interest rate rises.

“The latest Fed minutes indicate that (Chair) Janet Yellen is preparing the ground work for unwinding its balance sheet at the end of the year and markets aren’t expecting large interest rate increases for now,” said David Madden, markets analyst at CMC Markets in London.

In mid-morning trading, the dollar index was down 0.4 percent at 95.954.

The dollar slipped 0.1 percent to 113.16 yen, after rising more than 1 percent this week.

The euro, meanwhile, rose 0.4 percent to $1.1397.

The minutes of the ECB meeting nudged the euro higher as bond yields rose, though the single currency hemmed within recent trading ranges.

Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Saikat Chatterjee in London; Editing by Frances Kerry

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