FX Daily Strategy: N America, June 3rd

We expect a 100k increase in May’s ADP estimate for private sector employment, which would be similar to April’s 109k, which was the strongest since January 2025. It would not be as strong as a 4-week average of 37.75 in the weekly ADP employment report for the weeks to May 9 implies. The weekly ADP data in early April looked similar to the weekly data in early May. Positive signals from the weekly ADP data are consistent with low initial claims, with the initial claims 4-week average lower in May’s payroll survey week than in April’s, though the weekly data has moved off the lows by the time of the survey week, and the signals from continued claims are not as strong.

We expect some slowing ion the non-farm payroll, to 85k from 115k overall and to 90k from 123k in the private sector. We thus expect a modest outperformance of private sector payrolls from May’s ADP report after a modest underperformance in April. The closure of Sprit Airlines caused 17k redundancies that should be caught by non-farm payrolls but may not be by ADP data.

We expect May’s ISM services index to pick up to 54.5 from 53.6 in April, picking up after two straight declines from February’s 56.1. While rising energy prices are a downside risk for services activity, seasonal adjustments may provide some support in May. We expect outcomes of 56.5 for both business activity and new orders, picking up from 55.9 and 53.5 respectively, both benefiting from easier seasonal adjustments. We expect supply shortages coming from the Middle East conflict to bring a further acceleration in delivery times, to 57.5 from 56.8. Only in employment of the four contributors to the composite do we expect slowing, to 47.5 from 48.0.

USD flows continue to dominates as haven bids/offers from geopolitical uncertainty are in the driver's seat. There hasn't been much progress lately but also little signs of talks breaking down also. It is likely both sides will come to the middle ground with Trump facing domestic pressure and Iran met with steep economic difficulty plus full oil storage facility soon. 

Choppy trade continues with cautious trade within the recent range. Daily stochastics have ticked higher, suggesting room for a test of 99.50. But mixed/negative weekly charts should limit any break in renewed selling interest beneath congestion around 100.00. Meanwhile, support is at congestion around 99.00.