The USD recovered after touching multi-month lows versus majors and investors started taking profits from the oversold dollar position. The Canadian dollar was pushed lower as oil prices tanked with the resurgence of the greenback and more evidence of a split within the Organization of the Petroleum Exporting Countries (OPEC) as Saudi Arabia and Iran continue to disagree on the long term production strategy. Iran favours a more traditional oil price target via adjusting available supply of crude. Saudi Arabia prefers a market share battle despite a loss in revenue.
The reversal of the USD fortune comes ahead of the first U.S. employment release this week. The ADP private payrolls non farm employment change will be released Wednesday, May 4 at 8:15 am EDT. The jobs component continues to be the strongest pillar of the U.S. economy and this week is forecasted for another 200,000 plus new jobs to be added. The U.S. non farm payrolls (NFP) to be released at the end of the week is also anticipated to add 200,000 new jobs. All the employment data this week will not be enough to convince the Fed to hike when it meets in June, but ahead of the employment investors did not want to leave short USD positions live.
The USD/CAD has gained 1.418 percent in the last 24 hours. The pair is trading at 1.2714 after the USD surged after the North American trading session open. The CAD has fared no better than commodity and emerging markets against the mighty buck. The oil output freeze will continue to be out of reach as Iran and Saudi Arabia cannot agree on a single direction for the OPEC membership.
West Texas crude has dropped 2.28 percent in the last 24 hours. The price of WTI oil has fallen below the $43 price level after the rise of the USD. The price of oil has been held up by the possibility of OPEC and non-OPEC producers eventually reaching a production freeze agreement. The Doha meeting failed when Saudi Arabia was not ready to commit if Iran is not part of the deal. Iran is still ramping up its production after coming out of international sanctions. Iran is hoping to increase its production by 1 million daily barrels to match pre sanction levels, which they think its fair considering other producers are pumping at record levels.
Canadian trade data will be released shortly after the ADP at 8:30 am EDT. The market forecast calls for a 1.2 billion deficit after the 1.9 billion disappointment last month. Sales to the U.S. have been softer as American consumers are spending less overall despite the boost that the lower loonie provided. After the huge unexpected rise in the deficit a figure inline with January’s 1.3 billion is anticipated.
Cad events to watch this week:
Wednesday May 4
8:15am USD ADP Non-Farm Employment Change
8:30am CAD Trade Balance
10:00am USD ISM Non-Manufacturing PMI
10:30am USD Crude Oil Inventories
Thursday May 5
8:30am USD Unemployment Claims
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