New Canadian employment data beat forecasts, and that has implications for the U.S. economy and the dollar.
Hey, how about that Canadian employment report?
Wall Street was expecting 10,000 new jobs in March, but instead there were 82,300. Not surprisingly, the Canadian dollar is having a good day on the news - but the question now is how to use the report to position for Friday's U.S. nonfarm payrolls report.
The two countries' close economic ties don't mean the Canadian data is a precursor of a big number in the U.S., Camilla Sutton, chief currency strategist at Scotia Capital, told me. She points out that Canada has managed started its post-recession jobs recovery before the U.S., but "over the last 5 months, Canada's employment numbers have disappointed. Today's 80,000 gain in jobs is impressive, but simply evens out the upward trend. I do not think it suggests that the U.S. employment release should be higher."
Then there is the fact that trading is likely to be relatively light thanks to the Good Friday holiday. "Any disappointment in an illiquid market could prove very interesting," Sutton adds.
Michael Woolfolk, senior currency strategist at Bank of New York Mellon, is also cautious about the payroll outlook. "The whisper number could be something larger than 250,000," he told me. "The problem is that everyone is talking about it, but nonfarm payroll data is so unpredictable," and if the figure comes in below 200,000, stocks are likely to sell off.
Remember, though, that weakness in stocks often means a good day for the dollar. "I'd actually see this as a positive development for the dollar if we get a disappointment," Woolfolk told me.
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