USD/CAD US Trade Balance and ADP Pressure Loonie

US Economic Indicators Boost USD After Beating Expectations

The USD/CAD surged higher after the USD positive indicators were released. U.S. trade balance, non-manufacturing ISM and the ADP non-farm private payrolls all came above expectations and gave an edge to the U.S. dollar versus the Canadian counterpart that received support from trade data. After trading in a tight range at the start of the Asian session at 1.3060 the pair started to appreciate and the trend got more pronounced as the economic indicators were released.

ADP Slows Down But Employment Solid

The U.S. private payrolls processor ADP reported a gain of 182,000 jobs in October. The figures were in line with expectations, but this is the fourth month that they are not able to break above 200,000. Last month’s figure was revised down to 190,000.

The Canadian and U.S. employment reports will be published on Friday and while the ADP does not correlate to the final NFP numbers, of late they have been both pointing to a low unemployment rate but with hints of a slowdown of the pace at which America is able to create jobs.

Not all Trade Balance Deficits Shrink Equally

The trade balance figures from Canada and the United States narrowed their deficits in September. Canadian exports grew 0.7 percent and there were positive signs that final destinations are more diversified while imports fell 1.3 percent. Canadian data was overshadowed by the positive U.S. trade balance. The U.S. trade deficit narrowed by 15 percent after exports bounced back and imported shrank. The Federal Reserve and Corporate America continued to question the potential impact of a strong USD hurting exports.

The trade balance reassured the markets that a strong currency does not need to be toxic to growth. The economic indicators this week will lead up to the non-farm payrolls on Friday and a strong showing could put the December interest rate hike back on the table for good.

October ISM Beat Expectations Boosts USD

The October Institute for Supply Management (ISM) survey of non-manufacturing purchasing managers crushed forecasts with a 59.1 reading versus an anticipated 56.6. The purchasing managers that were part of the survey remain positive about business conditions and the overall economy while commenting on the effects of the good weather. It is also important to note some concerns as business have taken conservative approaches to spending. The pace of growth of the non-manufacturing sector will no doubt enter into the Fed’s calculations when it determines if the American economy is ready for a raise of benchmark interest rates.

USD/CAD events to watch this week:

Thursday, November 5
10:00am CAD Ivey PMI
Friday, November 6
8:30am CAD Employment Change
8:30am CAD Unemployment Rate
8:30am CAD Building Permits m/m

*All times EST
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza