- USD/CAD sees downside below 1.3500 as weak US ADP private payrolls data sent the US Dollar inside the woods.
- Fresh private payrolls surprisingly come in lower at 99K than estimates of 145K.
- The BoC is expected to soften its interest rate policy further.
The USD/CAD pair faces pressures in holding the psychological support of 1.3500 in Thursday’s New York session. The Loonie asset senses selling pressure as the United States (US) Automatic Data Processing (ADP) Employment has surprisingly come in weaker-than-expected.
The agency reported that there were 99K fresh payrolls in the private sector in August. Investors anticipated that private employers hired 145K job-seekers, higher than July’s reading of 111K, downwardly revised from 122K. This has deepened fears of deteriorating labor market conditions and has prompted expectations that the Federal Reserve (Fed) will begin reducing interest rates aggressively this month.
Surging Fed large rate cut bets have weighed heavily on the US Dollar (USD). The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, slumps to near 101.00.
Going forward, investors will focus on the US ISM Services PMI data for August, which will be published at 14:00 GMT.
Meanwhile, the Canadian Dollar (CAD) remains under pressure as market participants see the Bank of Canada (BoC) continuing its policy-easing spell further. The BoC reduced its interest rates by 25 basis points (bps) to 4.25% on Wednesday. This was the third straight interest rate cut announcement of 25 bps by the BoC. Analysts at ING said in a note on Wednesday, “We essentially see the BoC cutting rates 25 bps at each meeting until next summer, by which time the policy rate is expected to be down at 3%.”
Going forward, the Canadian Dollar will be influenced by the labor market data for August, which will be published on Friday. The employment report is expected to show that Canadian employers hired fresh 26.5K job-seekers after laying off 2.8K workers in July. The Unemployment Rate is seen rising further to 6.5% from the former release of 6.4%.
Economic Indicator
ADP Employment Change
The ADP Employment Change is a gauge of employment in the private sector released by the largest payroll processor in the US, Automatic Data Processing Inc. It measures the change in the number of people privately employed in the US. Generally speaking, a rise in the indicator has positive implications for consumer spending and is stimulative of economic growth. So a high reading is traditionally seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.
Read more.Last release: Thu Sep 05, 2024 12:15
Frequency: Monthly
Actual: 99K
Consensus: 145K
Previous: 122K
Source: ADP Research Institute
Traders often consider employment figures from ADP, America’s largest payrolls provider, report as the harbinger of the Bureau of Labor Statistics release on Nonfarm Payrolls (usually published two days later), because of the correlation between the two. The overlaying of both series is quite high, but on individual months, the discrepancy can be substantial. Another reason FX traders follow this report is the same as with the NFP – a persistent vigorous growth in employment figures increases inflationary pressures, and with it, the likelihood that the Fed will raise interest rates. Actual figures beating consensus tend to be USD bullish.
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