ADP Jobs Report Surprises, Eurozone Retail Sales Disappoint, and RBNZ Expected to Maintain Policy

The blow-out ADP jobs numbers in the US have raised concerns about tightening measures. The dollar weakened as the yield curve descended, and the euro benefited from stronger-than-expected German factory orders. Meanwhile, rising labour costs in Japan have added to worries for the BOJ's ultra-low policy, and economists unanimously expect the RBNZ to maintain its policy. Let's dive into the key factors for today, market movers, the big news, the economic calendar, and our quote of the day.

Key Factors for Today

• Blow-out ADP Jobs Numbers Raise Concerns about Tightening Measures
• Dollar and Gold Falter as Upbeat ADP Employment Report Surprises
• German Factory Orders Assist Euro, Despite Weak Eurozone Retail Sales
• Rising Labor Costs in Japan Raise Worries for BOJ's Ultra-Low Policy
• Economists Unanimously Expect RBNZ to Maintain Policy, NZD Suffers

Market Movers

• The June measure of ADP employment more than doubled expectations at 497K adds versus the forecasted 225K, the most significant increase since February last year.
• The euro rose higher after German factory orders surprised with a growth of 6.4% in May, compared to the expected 1.0%. However, the annual measure still showed a negative trend at -4.3% compared to April's -9.7%.
• In Japan, rising labour costs have raised concerns for the Bank of Japan's (BOJ) ultra-low policy. May labour cash earnings rose 2.5% compared to the expected 1.2%, with the base salary rising 1.8% in May, the fastest increase since the beginning of 1995. However, Japanese household spending fell 4.0% compared to the forecasted -2.5%.
• The New Zealand dollar (NZD) suffered as economists unanimously expect the Reserve Bank of New Zealand (RBNZ) to maintain its policy at its upcoming meeting.

Economic Calendar

• Halifax House Price Index
• Canada Employment Change
• Non-Farm Payrolls
• Ivey PMI
• ECB President Lagarde Speech

Concerns Mount as ADP Jobs Report Reveals Fragmented Market and Raises Tightening Worries

The blow-out ADP jobs numbers in the US have raised concerns about tightening measures in the markets. With substantial hiring in leisure and hospitality jobs, the report showed a fragmented market, with declines in manufacturing, tech, and finance sectors. The significant increase in ADP employment, more than double the expectations, led to a weakening dollar and gold, while yields rose.

Euro Defies Weaker Retail Sales, Rides on Robust German Factory Orders

Despite weaker eurozone retail sales, the euro gained strength after German factory orders surprised with robust growth in May. While the annual measure remained negative, the monthly jump was the most significant since June 2020. However, logistics disruptions caused by the low water levels of the Rhine River may pose challenges in the coming months.

Rising Labor Costs in Japan Trigger Concerns for BOJ's Ultra-Low Policy Amidst Mixed Economic Indicators

In Japan, rising labor costs have raised worries for the BOJ's ultra-low policy. As labor cash earnings and base salary experienced faster growth, inflationary pressures may challenge the central bank's stance. Japanese household spending, however, fell, reflecting potential economic headwinds.

RBNZ Poised for Policy Hold as Economists Unanimously Agree, Impacting New Zealand Dollar

The RBNZ is expected to maintain its policy, with all economists in agreement for the first pause in almost two years. This consensus has impacted the New Zealand dollar, which experienced a decline in value as the AUD-AUD benchmark 10-year yield rose.