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Canadian Exchange Rate

The Canadian Dollar: The last  on our list of forex currencies is thecurrency trading forex online with anna USD/CAD pair. Here we are going to look at the secondary currency, the Canadian dollar as we have already considered the US dollar.

Canadian Exchange Rate : Canadian Dollar

The Canadian dollar is often referred to as the 'loonie' for the simple reason that the one dollar coin has a picture of the loon, a common Canadian bird on the back! Like most economies around the world, the service sector dominates, and yet it is one of the richest countries in terms of natural minerals and resources. The US and Canada are close trading partners and intertwined due to their geographic proximity. Its major exports include cars, plant and machinery, and oil. Canada's reserves of oil are second only to Saudi Arabia!

Canadian Exchange Rate : Canadian Economy

A vast country with a wealth of natural resources, the economy is very strong but extremely dependant on the US economy since approximately 83% of its exports go to its next door neighbour. Any changes in the US economy will have an immediate and knock on effect in Canada. The central bank is the Bank of Canada, established in 1934, and is responsible for monetary policy. Like the UK the BOC is set inflation targets by the Department of Finance, which it must achieve. The board meet eight times a year to discuss the economic outlook and to raise or lower interest rates accordingly. 

Canadian Exchange Rate : Factors Affecting Canadian Dollar

The main influencing factor is the US economy, so a downturn in the US will have a similar knock on effect in Canada. As a general rule, since the country is highly dependent on natural resources, as commodities increase in value the Canadian dollar will also tend to increase, giving a positive correlation to the currency. The reverse occurs when commodity prices fall. The Canadian dollar is also another of the carry trade opportunities, although the Japanese Yen is always top of the list with traders given the countries' very low interest rates.

Canadian Exchange Rate : Major Economic Indicators
Interest rates - Naturally these can cause major moves in currency. Often considered a blunt instrument, their effect in the market may last only a few hours or days, before the trend continues unbroken. In Canada, the effect can be dramatic as the BOC issues a statement with every announcement, and like America, the wording is considered as important as the news itself, since this gives hints to future monetary policy and the current thinking of the board. The announcements are made eight times a year and are released at 9.00 am EST.
GDP - GDP is a classic lagging indicator and foremost in reporting on the health of the economy as it measures how fast or slow the economy is growing.  Figures are released quarterly in Canada, but as the information is generally pre-released in production figures then the news generally has little impact on the currency.
CPI - Consumer Price Index, Another of the red hot indicators that is dissected by the currency and broader markets and measures the change in retail goods and services. The headline figure is presented as a % change on the previous month's figures and also on the annual numbers. This is the prime indicator for inflation and is therefore monitored closely by the markets. As with many economies the data is presented as a core figure and a headline figure. In Canada, the core figure excludes the 8 items that are considered to be the most volatile over the previous month, in order to try to provide a more accurate assessment of core inflation. The figures are announced monthly around the 20th of each month at 8.30 am EST.
Trade Balance - The trade balance indicates whether the country is exporting more than it is importing, a positive trade balance, or importing more than it is exporting which is a negative trade balance. A positive balance will translate to upward pressure on the currency as money flows out of the country, causing greater demand, whilst a negative balance will have the opposite effect. The figures are announced quarterly and approximately three months after the end of the reporting period, so they are almost 6 months out of date by release. They therefore tend to have a limited impact on market volatility.

If you would like a more detailed look at the Canadian Dollar, the Canadian exchange rate, and it's relationship to the US dollar, I have recently published a new site which examines this pair in detail. Please just follow the link USD to CAD.  Finally let's look at the Japanese Yen which will complete our economic analysis of the world's major currencies.

 

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