- USD/CAD drops to near 1.3620 as Dollar weakens following poor US data
- US private labor demand remained sluggish and the services PMI contracted in June.
- Investors are awaiting official US/Canada employment data for June.
The USD/CAD pair fell sharply to near 1.3650 in the American session on Wednesday. The USD/CAD weakened as the US Dollar (USD) faced an intense sell-off after the US ADP employment report showed that job growth in the private sector surprisingly slowed in June and the ISM Services PMI report showed that activities in the service sector contracted significantly.
According to the report, private employers hired 150,000 job seekers, missing estimates of 160,000 and the previous release of 157,000, revised upwards from 152,000. This has deepened uncertainty about the labor market outlook. However, investors are awaiting the US Nonfarm Payrolls (NFP) report for June, which is due out on Friday. The US NFP report will provide clarity on the current state of the labor market.
Meanwhile, the services PMI fell to 48.8 from expectations of 52.5 and the previous release of 53.8. A reading below the 50.0 threshold is itself considered a contraction in services activities. Other subcomponents, such as the Prices Paid Index and New Orders, were weaker than their previous readings.
The US Dollar Index (DXY), which tracks the value of the greenback against six major currencies, has fallen to around 105.30.
On the CAD front, investors are awaiting the Canadian employment report for June, which will be released on Friday. The labour market report is expected to show that the unemployment rate rose to 6.3% from the previous release of 6.2%. Canadian employers hired 22,500 workers, which was lower than the previous reading of 26,700.
Strong employment figures would lower expectations for further rate cuts by the Bank of Canada (BoC), while soft figures would raise them.
Economic indicator
ADP Employment Report
The employment data is prepared by Automatic Data Processing Inc. The U.S. nonfarm private sector payrolls index is published monthly in collaboration with Moody’s Analytics. It is an estimate of the change in the number of people employed in the U.S. nonfarm private sector. A positive number means that the private sector saw an increase in payrolls, while a negative number means that the private sector saw a decrease. Figures that exceed expectations are generally positive for the dollar, while figures that fall short are negative.
Latest Post: Wed Jul 03, 2024 12:15 PM
Frequency: Monthly
Current: 150K
Dear: 160K
Previous: 152K
Fountain: ADP Research Institute
Traders often consider employment figures from ADP, the largest payrolls provider in the United States, to be the harbinger of the Bureau of Labor Statistics’ Nonfarm Payrolls release (usually released two days later), due to the correlation between the two. The overlap of both series is quite high, but in individual months, the discrepancy can be substantial. Another reason currency traders follow this report is the same as with the NFP: vigorous and persistent growth in employment numbers increases inflationary pressures, and with them, the likelihood of the Fed raising interest rates. Actual figures that beat consensus tend to be bullish for the USD.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
