USD/CAD Canadian Dollar Lower Ahead of US Private Jobs Data

The Canadian dollar depreciated on Tuesday as the USD dollar recovered some stability. US President Donald Trump will visit Texas after Hurricane Harvey has left the state in recovery mode. The damage from the storm is still being assessed and could end up being one of the costliest natural disasters in the United States. Oil prices bounced from earlier lows. West Texas oil was hit particularly hard as unlike Hurricane Katrina, Harvey hit refineries instead of platforms resulting in a glut of crude but a halt of gasoline supplies.

US employment data will begin rolling out on Wednesday with the release of the ADP private payrolls report. The ADP report will be an important data point ahead of the release of Friday’s U.S. non farm payrolls (NFP). The government report includes a larger data set and is more influential. Although the correlation has not been high, the market does take into consideration the information from the private payroll report, specially around wage growth. The forecast calls for a gain of 186,000 positions which has been a consistent estimate by the consensus this year.

NAFTA talks are due to kick off on Friday with US President Donald Trump already issuing a warning to Canada and Mexico over their lack of compliance and his plans to scrap the deal. After signing a non-disclosure agreement there will be little details for traders on how the renegotiations of the trade deal are going. The Canadian dollar and the Mexican peso will be sensitive to more comments from President Trump on the trade talks. The US already pulled out of the Trans Pacific Partnership (TPP) as soon as Trump took office. The remaining 11 members are now in Sydney planning to move forward without the US.

usdcad Canadian dollar graph, August 29, 2017

The USD/CAD gained 0.256 percent on Tuesday. The currency pair is trading at 1.2529 near daily highs after the USD regained some traction awaiting US employment releases. Oil prices are lower after Hurricane Harvey has taken about 18 percent of refinery capacity offline. West Texas crude has decoupled from its European counter part Brent crude and will continue on a divergent path until the disruptions have worked themselves out of the energy pipeline.

Canadian data was soft today, with producer prices falling 1.5 percent in July. Canadian data will be sparse this week with US employment data taking most of the spotlight. The Canadian current account will be released on Wednesday at 8:30 am EDT. The main indicator release this week for CAD traders will be the monthly GDP data due on Thursday, August 31 at 8:30 am EDT. The Canadian GDP is expected to have slowed down after a strong first half of the year. The Canadian economic release will be sandwiched between the ADP private payrolls report on Wednesday and the U.S. non farm payrolls (NFP) release on Friday.

West Texas Intermediate graph

US Energy gained 0.017 on the last 24 hours. The price of West Texas Intermediate is trading at 46.21 after the heavier rains from Hurricane Harvey have subsided. The aftermath of the storm still leaves close to 20 percent of oil production offline causing a glut of crude, but not enough refineries to turn it into gasoline prompting a spike in prices of the distillate.

Oil prices recovered on Tuesday ahead of the weekly inventories report due on Wednesday, at 10:30 am EDT. The estimate is for a drawdown of 1.9 million barrels last week before Hurricane Harvey hit Texas. Unlike Hurricane Katrina, Harvey has missed offshore platforms but hit refineries. This week’s data will paint a different picture as the shutdown in refineries has led to a surplus of crude that took a toll on the price of WTI. The disruption is expected to be temporary with the recovery coming in the next couple of weeks.

Market events to watch this week:

Wednesday, August 30
8:15 am USD ADP Non-Farm Employment Change
8:30 am USD Prelim GDP q/q
10:30 am USD Crude Oil Inventories
9:30 pm AUD Private Capital Expenditure q/q
Thursday, August 31
8:30 am CAD GDP m/m
8:30 am USD Unemployment Claims
9:45 pm CNY Caixin Manufacturing PMI
Friday, September 1
4:30 am GBP Manufacturing PMI
8:30 am USD Average Hourly Earnings m/m
8:30 am USD Non-Farm Employment Change
10:00 am USD ISM Manufacturing PMI

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

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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 has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. 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