- The downside of the EUR/CAD cross would be retrained due to the dovish mood surrounding the BoC.
- Canada's Consumer Price Index eased to 2.5% YoY in July, which has marked the slowest increase since March 2021.
- ECB officials adopt caution about committing to a rate-cut path amid inflation concerns.
EUR/CAD halts its gains, trading around 1.5130 during the European session on Wednesday. The Canadian Dollar (CAD) strengthens against its peers despite soft inflation data that supports a dovish stance from the Bank of Canada (BoC). Furthermore, the commodity-linked CAD managed to hold its ground, even as crude Oil prices declined. Given the fact that Canada is the largest Oil exporter to the United States (US).
Canada's Consumer Price Index (CPI) eased to 2.5% year-on-year in July, down from 2.7% in the previous month, aligning with market expectations. This marks the slowest increase in consumer prices since March 2021. Additionally, the closely watched BoC Consumer Price Index Core fell to 1.7% YoY, from the previous 1.9% reading, reinforcing dovish expectations for the Bank of Canada.
West Texas Intermediate (WTI) Oil price extends its losing streak for the fourth successive session, trading around $73.00 per barrel at the time of writing, amid hopes for a ceasefire in the Middle East. US Secretary of State Antony Blinken concluded a trip to the region aimed at facilitating a ceasefire in Gaza. Blinken, along with mediators from Egypt and Qatar, has raised hopes for a US "bridging proposal" that could narrow the gaps between the conflicting parties in the 10-month-old war, per Reuters.
The EUR/CAD cross received support as traders expect the European Central Bank (ECB) to gradually lower interest rates. However, ECB officials have been cautious about committing to a specific rate-cut schedule, given concerns that inflationary pressures might pick up again.
Traders are likely to observe Purchasing Managers Index (PMI) data from the Eurozone and Germany scheduled for release on Thursday. HCOB Composite PMI for the Eurozone is expected to report a 50.1 reading, falling short of the previous reading of 50.2 reading.
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD stays pressured toward 1.1100, as USD recovers ahead of Fed Minutes
EUR/USD stays on a slippering slope toward 1.1100 in the European session on Wednesday. The pair is weighed down by resurgent US Dollar demand, as markets turn cautious ahead of the annual US NFP revision and the Fed Minutes.
GBP/USD struggles above 1.3000 on renewed US Dollar demand
GBP/USD remains offered toward 1.3000 in European trading on Wednesday, having hit yearly highs at 1.3052 on Tuesday. The US Dollar finds fresh demand amid a tepid risk tone, as traders await the US NFP revisions and the Fed Minutes for fresh cues on the policy path.
Gold pulls back as traders gauge health of US economic outlook
Gold pulls back to the $2,510s on Wednesday after touching a new all-time high of $2,531 on the previous day. The correction coincides with a slight bounce in the US Dollar (USD), to which Gold is negatively correlated.
Top three AI-related tokens yielding highest gains year-to-date: AIOZ, AR, FET
The Artificial Intelligence (AI) sector in the crypto market has a few protocols whose tokens have generated significant yields for users since the beginning of 2024.
Where is the US Dollar heading after the Fed paved the way for a September cut? Premium
Financial markets have been extremely volatile in the last couple of weeks, as all of a sudden, investors realized central bank officials still have the ability to surprise them.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.