US Dollar Rises as Strong Labor Data Outweighs Low Manufacturing Activity

The US dollar climbed against the euro on Wednesday in the wake of the strongest job gain in the United States since March. However, the greenback erased most of the gains it had made earlier in the day as manufacturing activity in October disappointed expectations.

The ADP Research Institute, which publishes a monthly report on employment change in the United States two days ahead of government data, said that the labor market improved in October. The US nonfarm private sector hired 235,000 new employees last month, following an increase of 110,000 in the previous month. Analysts had expected a smaller gain of 200,000.

Most of the gain came from large firms, which hired 90,000 new employees in October, followed by small businesses that created 79,000 positions. Sector-wise, almost half of the increase came from new hires in the professional and business sector. Construction companies came in second with 62,000 new workers. On the negative side, trade and transportation firms lost 50,000 workers, while the information sector gave up 27,000 employees.

Last month’s increase was the fourth best in 2017, following stronger gains in every month of the first quarter of the year. Investors now anticipate the official data from the US Bureau of Labor Statistics on Friday, which is expected to show a 303,000 increase in private sector employment.

The positive support from today’s ADP report for the US dollar was partly canceled out by a release that revealed a drop in manufacturing activity. The US Institute for Supply Management stated that the manufacturing purchasing managers’ index dropped to 59.8 in October from 60.3 in September. Forecasts ahead of the report pointed to a reading of 60.0.

The drop was broad, as the new orders subindex fell to 63.4 from 64.6, while the employment subindex dropped to 59.8 from 60.3. The production index also declined to 61.0 from 62.2. The data is complied from a survey that includes over 400 industrial firms.

EUR/USD fell to 1.1617 as of 15:25 GMT on Wednesday after reaching down to 1.1607 at 12:45 GMT, the lowest level since October 30. EUR/USD began the day at 1.1637. GBP/USD was at 1.3251, the pair’s weakest level since yesterday, after starting trading at 1.3277.

The Dollar Index, which tracks the strength of the US currency against a basket of its major counterparts, rose at 94.80 today from 94.55 yesterday.

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