Factors Affecting The Exchange Rates Of USD/CAD

Forex markets are highly volatile, where the exchange rates of currencies keep fluctuating every minute. The USD/CAD is one of the most popular currency pairs in the forex markets. USD/CAD is the exchange rate quoted to exchange US dollars to Canadian dollars. In short, it is the amount of Canadian dollars you receive for one US dollar. Many factors such as the political issues, economic forces, imports and exports, etc. influence the rate of exchange of USD and CAD currencies. Let us understand about a few of them.

CAD is one of the top six currencies in the forex markets. It is also called as the Loonie and is used as a reserve by many forex traders. Factors influencing the CAD forecast are

  • Prices of commodities such as oil, petroleum products, minerals, precious metals etc.
  • Interest declared by Bank Of Canada
  • Rate of employment
  • Rate of job creation
  • Budget deficit of the country
  • Amount of national debt
  • Political stability
  • Domestic and international policies
  • Canada and USA trade relations

USD is the top traded currency in forex markets and is the primary reserve currency of the world. Factors that affect the USD are

  • Interest rate cuts or increases made by the Federal Reserve
  • GDP growth rate
  • Rate of unemployment
  • Money supply
  • International trade agreements of America with other countries
  • Situation of Balance of payments
  • Budget deficit in the US
  • Amount of total national debt
  • Household income and savings rate
  • Political events

There are some of the important factors out of nearly 50 factors that affect the exchange rates of USD and CAD.

Canada and the US are neighboring countries and the USD/CAD has a huge a huge impact on different facets such as business, lifestyle and tourism in both the countries. When the CAD forecast is weaker, businesses from the US outsource labor and manufacturing to service providers in Canada in a bid to lower the costs. Apart from businesses, a weak CAD increases the imports from Canada to America and also increases investment in Canada.  When the CAD shows signs of improvement in the loonies’ rate, firms in Canada import from the USA and investments from Canada flow into the US.

CAD and USD are two of the most traded currencies in forex markets. More than 50 factors affect the exchange rate of USD and CAD forecast. The USD/CAD rate affects the business, lifestyle, tourism and investment in both the countries.

Share Button

Related posts