The Canadian Dollar is an interesting currency to watch, and has been for some time now. Over the past few years, the Canadian economy has run into troubles, and unfortunately, it seems as though the hard times are not over. Today, we’ll talk about economic data that was released last week, why it sent the CAD tumbling, and what binary options traders should be watching for ahead.
Canada’s GDP Was Unchanged In February
As mentioned above, the CAD took a bit of a dive as we closed last week off, and it happened for good reason. Ultimately, economic data was released, leading to overwhelming concerns. In fact, in the month of February, the country generated a little more than $1.7 trillion in total GDP. So, that’s good right? Not really.
The truth is that this is the same amount of money that was generated as far as GDP goes in January. At the end of the day, the Gross Domestic Product of any country is the basis for economic strength or weakness. With GDP standing still, it screams economic weakness. At the end of the day, there’s only one area that did well, and that caused concerns as well.
You see, Canada is going through a housing boom, and if it wasn’t for this housing boom, the country’s GDP would have gone backward instead of forward. That’s a major concern. At the end of the day, we’ve all seen what bubbles in real estate can become. Nonetheless, housing was a the driving factor behind the little economic strength Canada showed, helping to lift the finance and insurance, real estate, rental, leasing, and construction sectors, and keeping Canadian GDP out of negative territory.
Why This Had Such A Profoundly Negative Effect On The CAD
As I’ve said time and time again, a currency can only be as strong as the economy it represents. As a result, the poor economic data that was released by Canada led to concerns with regard to the strength of the country’s currency, and ultimately sent it downward. However, in this case, things get a bit more detailed.
You see, Canada’s economy has been doing well for several months, at least, up until February. As a result, there were expectations that the country’s central bank would soon raise interest. Because higher interest means higher demand, this would have sent the CAD upward. However, interest can only be raised when economic conditions are positive. So, a poor economic report on GDP growth in February means that interest cannot be increased. At the end of the day, the declines in the CAD weren’t only about poor economic data, they were also the result of smashed hopes of an interest rate increase in Canada.
What Binary Options Traders Should Be Watching For Ahead
Moving forward, binary options traders should definitely keep an eye on the CAD as the currency is likely to present several profitable opportunities ahead. However, if you want to take advantage of these opportunities, you’ll want to keep an eye on the news. First and foremost, pay close attention to Canadian economic data. This could be a blip on the screen, or declines could prove to be a trend. So, any new developments surrounding the Canadian economy will likely lead to movement in the currency. Also, keep a close eye on the oil and real estate sectors in Canada. In general, oil is a key driver for Canadian economic growth, but with low prices that have been seen for some time now, real estate seems to have taken the lead. Nonetheless, any updates with regard to either of these sectors will likely lead to movement ahead.
What Do You Think?
Where do you think the CAD is headed moving forward? Join the discussion in the comments below!