U.S. Session Forex Recap – May 5, 2016

  • U.S. ADP employment change up by 156K vs. 205K forecast
  • U.S. preliminary non-farm productivity down by 1.0% in Q1
  • U.S. preliminary unit labor costs up by 4.1% vs. 2.9% forecast
  • U.S. trade deficit narrowed from $47B to $40.4B vs. $45.6B estimate
  • U.S. ISM non-manufacturing PMI rose from 54.5 to 55.7
  • U.S. factory orders up by 1.1% vs. 0.7% forecast
  • Alberta forest fires weigh on Canada’s oil-sands production

Economic data from the U.S. came in mostly in the green, but was this enough to keep dollar strength in play?

Major Events:

U.S. economic releases A number of medium-tier reports were released from the U.S. and the results came in mostly stronger than expected. Only the ADP non-farm employment change figure fell short of expectations with a meager 156K increase in hiring versus the 205K forecast, signaling a possible disappointment for the upcoming NFP.

Meanwhile, preliminary non-farm productivity and unit labor costs showed upside pressure on wage growth. In particular, the latter showed a 4.1% jump, outpacing the projected 2.9% increase for the first quarter. The ISM non-manufacturing PMI climbed from 54.5 to 55.7 to indicate a faster pace of industry growth, with the components of the report showing gains in employment, prices, new orders, and inventories.

The trade balance and factory orders report also beat expectations, with the former showing a narrower deficit of $40.4 billion and the latter printing a 1.1% increase versus the estimated 0.7% uptick.

Forest fires in Alberta – Raging wildfire in Alberta, Canada’s hub for oil production, led to evacuation efforts and the shutdown of some pipeline operations. In particular, the town of Fort McMurray is home to the world’s largest oil production companies such as Shell and Exxon Mobil, with its oil-sands facilities drawing in a huge influx of investments for mining and drilling operations for the past few years.

Officials noted that the mandatory evacuation operations will carry on and that it may take a while before residents and workers are allowed to return to the areas. Keep in mind that Alberta has already been one of the worst-hit provinces by the oil price slump, which brought the town’s unemployment rate up to 9.8%. WTI crude oil fell to a low of $43.17/barrel while Brent crude oil is down to $44.13/barrel.

Major Currency Movers:

CAD – The Loonie was slammed across the board, as news of the Alberta forest fires hit the airwaves and brought additional challenges for the Canadian economy.

USD/CAD popped up to a high of 1.2885 after a bit of consolidation around 1.2750 earlier in the day, CAD/JPY is down to the 83.00 major psychological level, EUR/CAD surged to a high of 1.4820, and GBP/CAD is up to the 1.8650 handle.

Watch Out For:

  • Japanese banks closed in observance of Children’s Day
  • 1:00 am GMT: Australian HIA new home sales
  • 1:30 am GMT: Australian retail sales m/m (0.3% expected, 0.0% previous)
  • 1:30 am GMT: Australian trade balance (-2.95B AUD expected, -3.41B AUD previous)
  • 1:45 am GMT: Chinese Caixin services PMI (52.6 expected, 52.2 previous)

See also:

Asian Session Recap

London Session Recap

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