The wildfire in Fort McMurray, Alberta continues to rage on. Losses from the ongoing disaster are calculated at $1 billion. The price of oil rose as it is estimated 500,000 barrels are offline as the fire hit the crude producing province. The price of crude has kept the CAD in current levels as the USD rally has slowed down awaiting the U.S. non farm payrolls (NFP) report on Friday.
The mixed economic data in the U.S. has managed to steal some of the momentum away from the USD. The greenback has cleared a lower than expected ADP private payroll number, higher than expected claims and a lower than forecasted US ISM manufacturing PMI. One of the dollar positive stories this week has been the higher than expected ISM non-manufacturing PMI. Services are the silver lining in the American economy, which added employment growth expectations to booth.The USD/CAD has been flat in the past 24 hours. The pair is trading at 1.2869 and was threatening to break under 1.28 after the U.S. reported higher than expected unemployment claims. The moves in energy prices supported the CAD which has been reeling after the dismal trade data was released.
Bank of Montreal downgraded its outlook for the Canadian economy after the higher than expected trade deficit of 3.4 billion in March. The Canadian Bank now forecasts GDP growth at 2.9 percent from an earlier 3.3 percent. The February trade data was also updated to show a larger deficit than originally reported at 2.5 billion. Canadian exports are now back to November figures and getting little support from a weaker loonie. The U.S. being Canada’s largest trading partner is a concern as the surplus was the lowest since 1993.The price of energy continues to be volatile given the natural disaster in Canada and supply constraints in Libya. The surge of the USD earlier in the week found the oil price did not put any resistance to be pushed down, specially after the U.S. inventories released showed higher stockpiles on Wednesday. Low demand and a fractured Organization of the Petroleum Exporting Countries (OPEC) membership means supply will continue at record levels and only external disruptions will slow production. Demand on the other hand remains weak. The best hope for the sector is that the winter more than six months away is colder than the last one.
The market will focus on tomorrow’s employment releases, but with special attention to the U.S. non farm payrolls (NFP). The U.S. is expected to add 200,000 new jobs and keep the unemployment rate at 5.0 percent. Goldman Sachs has been the most hawkish about U.S. jobs and expects near 250,000 and a lower unemployment rate. The headline NFP figure will not matter as much as the wage inflation components as the Fed remains unmoved by monster job reports that lack positive signs of inflation.
The Canadian employment report is due at the same time as the American data. The report is forecasted to show limited gains in the job market with less than a 1,000 new jobs after the massive 40,000 gain reported in April. The Canadian job data has been defying expectations to the upside and the downside, rarely coming near forecasts so CAD traders will be on the look out for tomorrow’s release. U.S. data will steal the spotlight but Canadian data will be the last economic release that could further stabilize the loonie ahead of next week’s lack of economic data.
CAD events to watch this week:
Friday, May 6
8:30am CAD Employment Change
8:30am CAD Unemployment Rate
8:30am USD Average Hourly Earnings m/m
8:30am USD Non-Farm Employment Change
8:30am USD Unemployment Rate
*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar
About Alfonso Esparza
Senior Currency Strategist, OANDA, Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, he 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. Follow on Twitterand on his Google+ profile.