It’s NFP week and you know what that means – Canada will also print its jobs report!
Yep, Uncle Sam isn’t the only one printing labor market numbers this week! On Friday at 12:30 pm GMT Canada will also publish labor market data for the month of March.
Let’s take a look at some major points you need to know before you can confidently trade the event:
What happened last time?
- Net employment change: +15.4K vs. +21.3K expected, -88.0K previous
- Jobless rate unexpectedly dips from 5.9% to 5.8%
- Labor force participation rate unchanged at 65.5%
Canada’s labour market showed a healthy recovery after seeing a whopping 88,000 decrease in net jobs provided in February. A net of 15,400 workers had found jobs, which was enough to nudge the unemployment rate back down to 5.8%.
Not everything was stars and butterflies, though. For one thing, the net job gains masked the fact that 54,700 new part-time jobs had eclipsed a 39,300 loss in full-time work.
Thankfully for Loonie bulls, forex traders were too happy about pricing in Canada’s exemptions from Trump’s steel and aluminum tariffs to care about a small dip following months of strong Canadian jobs data.
What’s expected this time?
- Net employment change: +4.1K vs. +15.4K previous
- Jobless rate to remain at 5.8%
- Labor force participation rate to remain unchanged at 65.5%
Do leading indicators support expectations of a slightly weaker reading in March? Unfortunately, we only have Markit’s manufacturing PMI report to turn to, at least for now.According to the report, “robust” increases in output and new orders have resulted to “another marked rise in employment numbers” in March. Not bad, eh?
Before you get excited, though, take note that it’s the service sector that provides the bulk of the Canadian’s jobs. The IVEY PMI – which considers a broader field of purchasing managers – won’t be released until AFTER Canada’s jobs numbers. Boo.
What can past March releases tell us?
As you can see on the chart above, market players underestimate March’s net employment numbers about as often as they overestimate them.
Seasonality isn’t much help, either. But while there’s no overwhelming evidence that points to a weaker or stronger reading in March, it’s also worth noting that net employment changes have been printing upside surprises in the last four March releases. Bulls better cross their fingers for Canada’s jobs market to not out of steam now!
Any other factors I should be aware of?
Take note that there are other points that might influence the Loonie’s price action during U.S. trading session:
U.S. NFP report
It’s not called NFP week for nothing. Since the Fed has decided to stick to the three-rate-hike plan for 2018, traders will be looking out for (a) the reason why the Fed isn’t as hawkish or (b) a reason to prove the Fed SHOULD be hawkish.
An NFP report hit or miss could deliver the kind of volatility the monster report is known for. Make sure you’re watching your CAD trades closely while the U.S. NFP is released!
Trade war updates
As seen in the previous release, Loonie bulls and bears can easily shrug off a bit of upside or downside surprise if there are bigger catalysts moving higher-yielding currencies like the Canadian dollar.
Keep an eye out for the U.S. possibly retaliating against China’s latest set of tariff adjustments. Remember that move towards more protectionism can only mean tough times for the export-dependent Canadian economy!
That’s it for our preview this week, folks. If you do decide to trade the event, make sure you have your trading plan locked down before you execute any orders!