Key Data Points for USD Sentiment: ADP and ISM in Focus

This week, the USD’s trajectory is firmly tied to critical employment and economic data, with the ADP National Employment Report and ISM Non-Manufacturing PMI providing clear signals for the Federal Reserve’s next moves. Both reports hold the potential to influence expectations around a December rate cut, shaping USD price action across major currency pairs.

The ADP National Employment Report, due at 13:15, will set the tone for Friday’s NFP. The playbook here is straightforward: strong jobs data reduces the likelihood of a December 25bps rate cut, supporting USD strength, while weaker-than-expected employment data increases the chances of a dovish Fed.

Later at 15:00, the ISM Non-Manufacturing PMI will provide a vital snapshot of the U.S. service sector, which comprises more than 70% of the economy. The ISM report is particularly impactful due to its granular sub-indexes, such as employment and prices paid, which offer detailed insights into domestic economic conditions. A strong reading of 57.6 or higher, coupled with an employment sub-index above 53 and prices paid above 58.2, will reduce expectations of a December rate cut, likely fueling EUR/USD sellers at market. On the flip side, a softer PMI print—54.0 or lower—with weaker sub-indexes (employment below 52.9 and prices paid under 58) will increase the probability of dovish Fed action, leading to USDJPY selling.

These reports, alongside revisions and broader market sentiment, will be crucial in determining USD direction. For traders, today’s focus will be on the interplay between labor market strength, service-sector resilience, and their implications for the Federal Reserve’s December decision. With markets still pricing in a 67% chance of a 25bps cut, the data flow today will provide critical clarity on the path ahead for the USD.