Canada & the USA – A Divergence in Trade Balance
Dave Green • 2 min read
Today, the Asian and European sessions were comrpised of only a few forex trading opportunities due to the thin volatility. However, the New York session began with an enhanced volatility in the wake of significant economic events. One of the major reasons behind this icebreaker is the trade balance figures from the USA & Canada.
What’s The Trade Balance and How To Trade It?
It’s simply the difference between the imports and exports of goods in a month. It’s one of the major economic indicators that help us gauge the performance of the Canadian economy. As we know, 70% of the revenue from the Canadian economy comes from exports. Particularly, from the exports of crude oil. In addition, 75% of exports belongs to the USA. Therefore, the trade balance figures for the USA and Canada are worthy of trading.
Now that you understand the importance of exports to Canada, let me share some insights on the trade balance figures released recently.
Canadian Trade Balance – The Canadian export figures almost doubled in the month of February ($807 Million), as compared to the previous month in January ($447 Million). These figures demonstrate that the economy has sold more than they are purchasing and that they are likely to increase their foreign exchange reserves. It ultimately increases the worth of the Canadian Dollar.
U.S Trade Balance – This scenario was the opposite for the US since their deficits soared by $4.2 billion. This means that they have purchased more than they sold to other countries. This results in a lower foreign exchange and places the adverse impact on the currency.
Is It Likely To Impact USD/CAD?
It’s pretty simple. Since we have a positive trade balance figure from the Canadian economy, and a negative figure from the US, investors are likely to increase their bets for the Loonie.