- EUR CAD Rises – Low oil prices help Euro advance.
- ECB Likely to Extend QE – Euro may slide as reports say bank will extend programme.
- German CPI Ahead – Euro likely to gain tomorrow if CPI rises as expected.
The EUR CAD exchange rate continued its slow rise yesterday as falling oil prices hampered any attempt by the Canadian Dollar (CAD) to recoup its recent losses.
Euro (EUR) Canadian Dollar (CAD) Rises as Oil Dips Below $50 a Barrel
The Euro (EUR) has continued to build off of last week’s gains against the Canadian Dollar (CAD) as the falling price of oil continues to negatively impact the high-yield ‘Loonie’.
As one of Canada’s key exports, the Canadian Dollar has a direct correlation with crude prices, which have fallen recently as doubts have been cast on whether the Organization of the Petroleum Exporting Countries (OPEC) will be able to implement a deal to curb global oil production.
The fall in oil prices also comes despite an unexpected drop in US crude inventories last week, with stocks dropping by 600,000 barrels instead of rising by 700,000 barrels.
This is due to a growing number of OPEC members wishing to be exempt from the production cuts, with Iraq being the most recent (and arguably most prominent) country to do so due to its huge production volume.
With rumours that Russia is also reluctant to join the deal there are doubts of how much of a recovery oil prices are likely to make even if a deal were to be signed, which is likely to greatly hinder the Canadian Dollar’s chances of staging a recovery.
ECB Stimulus Speculation May Cause Euro Exchange Rate to Tumble
The Euro could easily slide in the long term however as speculation mounts that the European Central Bank will seek to extend its quantitative easing programme past the current plan of March 2017.
Reuters reports that central bank sources have said that the ECB is highly likely to continue to stimulate the European economy past March as it attempts to support the recent recovery in the Eurozone.
Following a bank policy meeting last week ECB President Mario Draghi announced that they had neither discussed tapering or extending its current QE programme and that the bank wished to remain flexible to ensure that the economy continued growing.
The potential for additional bond-buying is unlikely to be met positively by markets however, who (along with many politicians in Germany) will question the need for further monetary easing following the recent growth in Eurozone inflation, while banks continue struggling to remain profitable in the face of negative interest rates.
EUR CAD Exchange Rate Forecast: Positive German CPI Data Likely to Strengthen Euro
The Euro to Canadian Dollar exchange rate may rise further on Friday following the release of German’s latest consumer price index, which is currently forecast to rise to 0.8% in September – up from 0.7% the month before.
However the single currency could be hamstrung slightly by tomorrow’s French GDP data as it is expected to slide from 1.3% to 1.2% in the third-quarter, although an unexpected rise could allow EUR CAD to improve its potential gains.
The ‘Loonie’ will be entirely reliant upon rising oil prices if it seeks to pressure the Euro as the remainder of the week is devoid of any Canadian data releases, with its next major report due next Tuesday with August’s GDP print.
Current Interbank Exchange Rates
At the time of writing the EUR/CAD exchange rate was trending around 1.45 and the CAD/EUR exchange rate was trending around 0.68.