Comparing the Strengths of CAD and USD: What Drives their Values?

Economic indicators 

GDP growth, unemployment, and inflation affect the USD/CAD exchange rate. The USD can strengthen versus the CAD due to US GDP growth and low unemployment relative to Canada.

Interest rates and monetary policy

The USD/CAD market is influenced by BoC and Fed monetary policies. The CAD strengthened in 2023 as the BoC raised interest rates many times to 5% to contain inflation.

Oil prices

Oil prices and the USD/CAD exchange rate are linked since Canada relies heavily on oil exports. Oil price variations affect the Canadian Dollar (CAD), a commodity currency. 

Trade relations between the US and Canada 

US-Canadian trade relations affect the USD/CAD exchange rate favorably and negatively. Market concern regarding the economic consequences of trade agreement.

Geopolitical factor

Political stability and global events affect whether the USD appreciates or depreciates against the CAD. Investor confidence increases when the US and Canada are politically stable

Correlation with other currency pair

The USD/CAD's appreciation or depreciation depends on its correlation with other currency pairs like USD/EUR and EUR/CAD. 

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