Basic Fundamentals

What Market Fundamentals Can Affect The Canadian Dollar Futures?

In free market economies, supply and demand is the primary enabler for price movement. Any outside forces that affect supply and demand eventually affect prices. When you are considering a trade in the Canadian dollar market some of the basic fundamentals that you should consider are:

1. United States: The United States and Canada form the world's largest trading partnership. The most significant domestic influence on the Canadian dollar is the relative health of the Canadian economy. The U.S. buget and trade deficits have been wieghing on th US dollar.

2. Interest Rates: The Bank of Canada has been increasing the lending rate to help keep a lid on inflation. If the inflation continues to run above the Bank of Canada's target rate there may be additional interest rate hikes.

3. Commodity Prices: Because Canada is a large producer and net exporter of oil and metals. The value of the Canadian dollar is closely correlated to the strength of commoditry prices. The canadian dollar is know as a commodity based currency.

4. 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, while a negative balance will have the opposite effect.