In spite of the Canadian Dollar (CAD) weakening as a result of unexpectedly poor domestic GDP the EUR/CAD exchange rate has resumed a downtrend today following discouraging Eurozone CPI.
Canadian GDP Underperformance Bolstered EUR/CAD Exchange Rate to Weekly Best
In spite of the looming possibility of fresh European Central Bank (ECB) monetary loosening this week, the Euro (EUR) was shored up on Tuesday by the release of the latest German and Eurozone Unemployment Rate reports. As the number of unemployed individuals within Germany decreased by an unexpectedly large 13,000 the level of unemployment within the wider currency union dropped from 10.8% to 10.7%. Despite employment remaining generally weaker than in the US or UK this improvement nevertheless saw the single currency buoyed across the board, with investors seizing on this indication of more positive economic conditions within the Eurozone.
Although oil prices had been showing some resilience this week in spite of global glut concerns, the Canadian Dollar (CAD) experienced a sharp downturn yesterday afternoon. This was in response to the September Canadian GDP figures, which showed a far more severe slowing in economic growth than forecast. Growth stalled from 0.9% to 0.0% on the year, while contracting by -0.5% on the month. Naturally the appeal of the ‘Loonie’ was vastly reduced by this unimpressive data, pushing the EUR/CAD exchange rate to a weekly best of 1.4225.
Weaker Eurozone Inflation Weighs on Euro (EUR) ahead of ECB Policy Meeting
However, the single currency has not held onto its gains for long as traders have continued to speculate as to the nature of any quantitative easing measures ECB President Mario Draghi might announce following tomorrow’s central bank policy meeting. Sentiment towards the Euro has turned particularly bearish after disappointing Eurozone Consumer Price Index data. Failing to match expectations of a slight uptick to 0.2% inflation within the currency union remained at 0.1% on the year in November, suggesting that fresh stimulus is indeed needed to improve the economic outlook of the Eurozone.
EUR/CAD Exchange Rate Forecast: BOC Dovishness Predicted to Provoke Canadian Dollar Volatility Today
The prospects of the Canadian Dollar remain somewhat muted ahead of this afternoon’s Bank of Canada (BOC) Rate Decision, although pundits widely expect interest rates to be left unchanged at this juncture. Should policymakers take a more dovish tone in response to discouraging recent data the ‘Loonie’ could return to a downtrend against rivals, shoring up the EUR/CAD exchange rate.
Nevertheless, the upcoming ECB announcement is likely to prevent the Euro from making any particular gains against a softened Canadian Dollar, with the EUR/CAD currency pair potentially weakening on the back of any harsher monetary loosening measures.
Current EUR, CAD Exchange Rates
At time of writing, the Euro to Canadian Dollar (EUR/CAD) exchange rate was trending lower in the region of 1.4162, while the Canadian Dollar to Euro (CAD/EUR) pairing strengthened to 0.7060.