Markets have had little tier-one macro data to focus on in the past ten days but today had to deal with two key US indicators which painted a mixed picture of the US economy. The ADP measure of private sector employment rose a massive 271,000 in December, the largest increase since July 2014. The US labour market continues to strengthen and markets will now be expecting this to be reflected in official labour market data out tomorrow.
However, the ISM manufacturing PMI fell sharply from 59.3 in November to 54.1 in December, its lowest level since September 2016. All sub-components were down, with the new orders index dropping from 62.1 to 51.1. These numbers suggest that US manufacturing activity has cooled rapidly in the face of higher US interest rates, the import tariffs war which the US and China have fought in the past six months and slowing global growth. They also provide further evidence that US GDP growth likely slowed further in Q4 from 3.4% quarter-on-quarter annualised in Q3.
Markets have seemingly interpreted these numbers as the US glass being half empty, with the Dollar weakening across the board. The Dollar trade-weighted index is down about 0.4% to its lowest level since 29th October 2018. The AUD/USD cross, which had hit a 3-year low yesterday, is up 1.4% and back above 0.70
