MACRO 4 minutes to read

Wall Street ignores dismal ADP print

Summary:  US equity markets shrugged off a major ADP jobs disappointment after the release showed 129,000 new positions rather than the 170,000 forecasted. Meanwhile, there may be a looming instability threat on the horizon for CAD as Prime Minister Trudeau's government deals with a messy corruption scandal.


Wall Street ignored weaker than expected ADP data and opened in positive territory. Traders took their lead from Asian and European bourses, which rallied after Chinese data improved the global growth outlook. However, prices are likely to stay close to home until Friday’s nonfarm payrolls report or fresh news about the trade talks.

The monthly ADP employment data reported 129,000 new jobs, which was below both the consensus forecast (170,000) and the upwardly revised February data. Equity markets didn’t care. That’s probably because the correlation between ADP and NFP results is poor and not a good indicator of NFP results.  Analysts are predicting Friday’s March NFP report will rebound from February’s weather-impacted 20,000 result and show a gain of 180,000 jobs. Average Hourly Earnings data are expected to dip to 0.3% from 0.4% in February while the unemployment rate stays unchanged at 3.8%

FX traders ignored the ADP report as well. They walked the US dollar higher against the major G10 currency pairs led by a drop in CAD while JPY and CHF were unchanged. USDCAD losses will be capped if oil prices stay above $62.00/barrel. The weaker than expected ISM non-manufacturing data (56.1 versus a forecasted 58.0) did not have much impact on FX trading.

Traders who are sick of the UK Brexit drama might consider turning their attention to what passes for political scandal in Canada. Prime Minister Justin Trudeau ejected two high-ranking women from both his cabinet and the Liberal party yesterday, with the move attracting much comment due to the enormous rhetorical emphasis placed by the PM on his gender-balanced government.

Former Attorney General Jody Wilson-Raboud was fired for recording a conversation with the Clerk of the Privy Council who was heard pressuring her to drop a criminal prosecution against SNC-Lavalin (SNC:CN) for bribery. Trudeau ignored the fact that, in Canada, it is illegal for the government to attempt to influence a prosecution.

The story took a neat twist today with CBC Canada reporting that Export Development Agency (the crown corporation whose role is to help finance Canadian companies' exports) is launching a review of its 2011 dealings with SNC-Lavalin.

The president of EDC at the time?

None other than current Bank of Canada governor Stephen Poloz.
EURUSD (30-minute, source: Saxo Bank)
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