The USD/CAD is one of the world’s major currency pairs, as they are both two of the seven currencies that make up over 80% of the volume of the forex market. Given the USA and Canada are neighbors, with close trade ties, the USD/CAD is a popular pair with traders. With a lot of market and political uncertainty last year, in 2017 there are many factors set to affect the currency pair. Those with a trading account need to be aware of such factors to help make informed trading decisions in the future.

Retail Sales

The release of sales figures always creates rises and falls in the value of Canadian and US dollars. Wholesale sales in December grew 0.7% above the forecast 0.3%, with core retail figures due to be released in February expected to be around 0.8%. When estimates such as these are matched or beaten it can provide a boost to the Canadian dollar against the greenback.

Flash manufacturing and service PMIs are due to be released by the US along with the minutes of its January Federal Reserve policy meeting. These could see the USD hold against the CAD. Further sales figures throughout the year will affect both currency’s value.   

Trade Agreements

Canada relies heavily on the US market for 73% of its trade, so any changes to existing trade agreements will have a big impact upon the USD/CAD currency pair. The inauguration of President Trump in January will have a large overbearing on the currency pair’s performance this year for many reasons, and trade is an important one.

He proposes a renegotiation or complete scrapping of the North American Free Trade Agreement (NAFTA), which created a trilateral trade bloc between the two nations and Mexico. This would pose a major risk to the Canadian economy and currency if such plans go ahead, likely resulting in the currency value falling.   

Oil Prices

Black gold, or oil as it’s more commonly known, is incredibly important to the USA and Canada. Over 3 million barrels of oil and petroleum are exported to the US from Canada every day, making Canada the largest supplier of oil to the USA.

This is closely correlated to the USD/CAD pair, as the huge volume creates a high demand for the Canadian dollar. However, changes in oil prices and demand can quickly see a fall in the USD/CAD. Heightened oil prices can lead to a lower demand for oil, for example, weakening the CAD. In 2017 oil prices are predicted to rise, which could negatively affect the currency pair.  

Interest Rates

Interest rates in the US and Canada both impact upon their own currencies and the pair as a whole. The US Federal Reserve is believed to be gearing up to raise interest rates three times in the year, while the Bank of Canada has been criticized for leaving its interest rates too high. The latter are now expected to fall at some point in the year, with the USD predicted to strengthen as the CAD weakens.

These factors need to be monitored closely by anyone trading the USD/CAD currency pair, as future developments could lead to important price swings in 2017.