US Crude Stockpiles Better Forecasts to Bolster Canadian Dollar (CAD) Demand
A lower-than-expected increase in US crude stockpiles on Wednesday has helped to shore up the Canadian Dollar (CAD), with the ‘Loonie’ also benefitting from an increased risk appetite in the wake of the latest FOMC meeting minutes. The Euro (EUR) has been trending lower on Thursday morning, driven down by the prospect of policy divergence between the Fed and the European Central Bank (ECB) in December.
Earlier…
Sentiment towards the common currency (EUR) has generally improved on Wednesday, in part buoyed by trader caution ahead of the October Federal Open Market Committee (FOMC) meeting minutes.
EUR/CAD Exchange Rate Slumped to Four-Month Low as Eurozone Economic Sentiment Declined
Despite the German ZEW Economic Sentiment Survey showing decisive improvement on the month in November, rising from 1.9 to 10.4, this was not sufficient to shore up the ailing Euro (EUR) yesterday. Caution continued to dominate the outlook for the common currency throughout Tuesday, despite positive progress towards the release of a 2 billion Euro tranche of bailout funds for Greece. The Eurozone ZEW Index, meanwhile, saw a decline from 30.1 to 28.3, as confidence within the currency union as a whole fell. As comments from policymakers further reinforced the likelihood of the European Central Bank (ECB) expanding its quantitative easing program in December the Euro was prompted to extend its losses against rivals.
Although risk aversion had been driving markets throughout the early week the Canadian Dollar (CAD) was nevertheless bolstered as increased geopolitical tensions saw the price of oil driven back up above $44. Consequently the EUR/CAD exchange rate was weighed down to a four-month low of 1.4162.
Euro Currency News: EUR Bullish Today as Eurozone Construction Output Rises
However, as Eurozone Construction Output was shown to have risen on the year in September to 1.8% the single currency has been rallying strongly on Wednesday. Although the odds of imminent ECB easing continue to rise, the Euro has benefitted from the increasing softness of the US Dollar (USD) ahead of the latest Federal Open Market Committee (FOMC) meeting minutes. As investors have become slightly less confident of a 2015 interest rate take-off from the Fed the expectation of a less hawkish set of minutes has helped to shore up the common currency today.
While global supply glut fears have been dragging on the outlook of crude oil prices have managed a resurgence on Wednesday afternoon following a decrease in US stockpiles. As the commodity remains decidedly volatile, though, the ‘Loonie’ has struggled to bolster itself versus the majors today, lacking the support of any fresh Canadian economic data.
EUR/CAD Exchange Rate Forecast: Euro Predicted to Strengthen on More Cautious FOMC Minutes
Should tonight’s FOMC meeting minutes indeed prove more dovish then the Euro is likely to see a further rise in demand, benefitting from the negative correlation of the EUR/USD pairing. With the minutes of the most recent ECB policy meeting due for release tomorrow, however, any rally for the single currency could ultimately prove short-lived.
On Friday the Canadian Dollar will be looking to rally with the domestic Consumer Price Index figures for October. Inflation is predicted to have picked up on the month, although the yearly CPI is not forecast to show any change. A stronger showing here, though, could see the ‘Loonie’ advance despite the continued volatility of oil prices.
Current EUR, CAD Exchange Rates
At time of writing, the Euro to Canadian Dollar (EUR/CAD) exchange rate was climbing around 1.4219, while the Canadian Dollar to Euro (CAD/EUR) pairing slumped in the range of 0.7030.