Lockhart Confirms Focus on Jobs but ADP Sags

The Fed's Lockart doubled down on the importance of jobs in the Fed's thinking on Wednesday so it was no surprise to see the dollar lag after a soft ADP report. Only the antipodean currencies lagged USD as iron ore and milk tumbled while the Swiss franc led the way. Key data from Australian and Japan is up next. Premium clients received 2 new trades related to the Aussie. 1 of the trades is in progress and already 115 pips in the money.

On Friday, Yellen expressed a preference for jobs numbers the top metric to determine when the Fed will hike and comments from the Atlanta Fed's Lockhart shows she isn't alone. He said employment measures should be watched more closely than growth in deciding liftoff as he continued to hint at a June-Sept window.

With that in mind, the Fed won't be enthusiastic about ADP employment at the lowest since Jan 2014 at just 189K compared to 225K expected. The metric has a short-term history of undershooting non-farm payrolls but it put the market on guard ahead of Friday's numbers.

In addition, the March ISM manufacturing report was at 51.5 compared to 52.5 expected and January construction spending was revised lower. It's increasingly likely that Q1 will be soft and could even be lower than 1% but after the rebound last year, the Fed may be confident that it was a weather-induced blip.

The FX market wasn't so sure on Wednesday as the US dollar fell on the numbers. USD/JPY skidded as low as 119.43 from 120.15 but that matched the Asia-Pacific low and created a minor double bottom and a bounce to 119.77.

The Australian dollar was hurt by iron ore prices fall below $50/tonne while the kiwi was hit by a more than 10% fall in dairy prices at the Fonterra auction.

On the flipside, the loonie caught a bid on a 5% rally in oil prices as Iran negotiations continue to drag on. In addition, US oil data showed the first signs of a dip in production and that was a strong buying signal for some.

The early focus in the day ahead is on the Australian dollar with the days counting down to the RBA decision. The TD/MI inflation gauge was flat in Feb and there is no expectation but it will get some attention from the market. At 0030 GMT, Feb trade balance is expected to show a 1.3B deficit.

At 2350 GMT, it's the second day of Tankan numbers in Japan with inflation estimates due. It's less of a market mover than the sentiment survey but can cause ripples.