US Payrolls data Friday.

US ADP data recorded an increase in private-sector payrolls of 235,000 for December, well above consensus forecasts of around 150,000 and the November increase was also revised higher to 182,000 from the original estimate of 127,000.

There were notable differences between sectors with a dip in manufacturing and trade and financial services jobs. There was also a net cut in employment within large companies with firm growth in smaller companies.

There was a slowdown in wages growth to 7.3% from 7.6% previously and the slowest increase since March 2022.

Initial jobless claims decline to 204,000 in the latest week from a revised 223,000 previously and below consensus forecasts of 225,000. Continuing claims also declined to 1.69mn from 1.72mn the previous week.

Following the stronger than expected US employment data, there was a net shift in Fed futures with markets raising the estimate of the terminal rate to 5.07% from around 2.95% at the beginning of the week.

The stronger than expected data and higher yields triggered renewed US dollar support with the US currency also gaining net support on defensive grounds as equities moved lower.

The yen was also subjected to renewed selling pressure after the US data.

German industrial orders declined 5.3% for November after a 0.6% increase for October and well below expectations of a 0.5% decline.

The latest employment report will be released on Friday with expectations of an increase in non-farm payrolls of close to 200,000 with the unemployment rate holding at 3.7%. The data on wages will also be important for underlying inflation and Fed policy expectations. The data overall will be important for Fed expectations and dollar confidence.

The Euro was unable to make any headway ahead of Thursday’s New York open with EUR/USD held just above 1.0600. Dollar strength dominated after the US data releases. EUR/USD slipped sharply to 1.0520 at the European close. Higher yields and weaker equities triggered renewed dollar demand against all majors. EUR/USD was unable to recover on Friday and traded around 1.0510.

USD/JPY advanced strongly to highs just above 134.00 on Thursday. USD/JPY hit highs near 134.40 on Friday before a correction to just below 134.00.

The Swiss franc was unable to make headway. EUR/CHF settled around 0.9850 with net USD/CHF gains to 0.9370.

The UK PMI services-sector index was revised marginally lower to 49.9 from the flash reading of 50.0. Domestic Sterling confidence remained notably fragile. Weaker US equities also triggered Sterling selling. GBP/USD posted sharp heavy losses with a slide below 1.1900 before stabilising

After little initial change, commodity currencies posted sharp losses on weaker equities and US dollar gains. AUD/USD dipped sharply to below 0.6750 before a slight recovery. USD/CAD rallied to highs near 1.3600 before correcting slightly to 1.3565.

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