On Wednesday (October 30), the United States released the ADP employment numbers for October and preliminary third-quarter GDP data. The ADP report indicated that 233,000 new jobs were added in October, the highest level since July 2023, far exceeding the market's expectation of 114,000. Hiring activities in industries such as education, healthcare, and transportation were particularly active, demonstrating the resilience of the U.S. job market. Meanwhile, the annualized real growth rate of U.S. GDP for the third quarter was initially estimated at 2.8%, slightly below the expected 3%. Although economic growth has slightly decelerated, consumer spending showed strong performance, with an annualized quarterly rate of 3.7%, above the expected 3.3%.
Following the release of strong employment and stable GDP data, the market reacted swiftly, with the U.S. dollar index rising 20 points to 104.39, and spot gold dropping nearly $4 to $2775.84 per ounce, reflecting a preference for the dollar and a decrease in safe-haven demand. Additionally, the yield on U.S. 10-year Treasury bonds rose to 4.268%, further indicating increased investor expectations for rising interest rates.
The ADP employment data, exceeding expectations, prompted analysts to reassess the likelihood of future rate cuts by the Federal Reserve. ADP's Chief Economist Nela Richardson stated that despite natural disasters impacting some industries, the overall U.S. job market continues to show good resilience. This performance might lead the Federal Reserve to maintain current interest rates at next week’s meeting. According to Goldman Sachs' analysis, ADP data has low sensitivity to disasters and strikes, indicating strong job demand even in the face of negative impacts. Meanwhile, robust consumer spending growth suggests that economic vitality remains, further strengthening the rationale for the Federal Reserve to remain cautious in its monetary policy.
The market reaction was also significant. The strengthening of the dollar and the outlook for a recovering job market impacted the safe-haven demand for gold, putting short-term pressure on its price. Additionally, the oil market benefited from the optimistic economic outlook, with U.S. NYMEX crude oil futures rising by 2.02%, to $68.57 per barrel. There are reports that OPEC+ might delay its production increase plan, which also provided support for oil prices. Technically, if gold breaks below the support level of $2770 per ounce, it may face a larger drop, and investors should be cautious about the risk of further dollar strengthening's suppressive effect on non-dollar currencies and commodities.
Overall, the strong performance of ADP and GDP data has led the market to reassess the expectation of rate cuts. The healthy performance of the job market has increased the dollar's appeal, and the Federal Reserve's monetary policy might remain stable amid these economic signals. With the upcoming release of non-farm employment data, the market will gain a more comprehensive signal on the job market to more clearly gauge the Federal Reserve's subsequent policy direction.
