Today the odds of the European Central Bank introducing additional stimulus fell as growth figures for Germany, France and the Eurozone exceeded expectations – indicating that the currency bloc ended last year in a stronger position than some investors expected.
The Euro consequently posted modest gains against the US Dollar but failed to make much of an impact against a bullish Pound.
The Euro’s advance was further limited by the news that the Eurozone trade surplus narrowed from a negatively revised 17.0 billion in November to 13.9 billion in December. Economists had expected a surplus of 14.5 billion.
However, the common currency was able to strengthen against the Canadian Dollar as the appeal of the commodity-driven asset was knocked by disappointing industrial/manufacturing output reports from the US (Canada’s main trading partner) and less-than-impressive domestic data.
Firstly, Canadian factory sales dropped in December, sliding by 0.9 per cent at the close of last year rather than stagnating as expected.
November’s gain was halved to 0.5 per cent.
The December slump was largely the result of a whopping 19.4 per cent decline in Aerospace products.
The figures indicate that Canada’s manufacturing sector continues to restrain the nation’s growth.
Separate figures revealed that Canadian existing home sales fell for a fifth month, declining by 3.3 per cent last month.
Although CREA, the Canadian Real Estate Association, attributed the bad weather for the blip, this figure does support the argument that the Canadian housing sector is no longer contributing to economic growth at the levels seen in previous years.
It wasn’t all bad news though as average home prices increased by 0.3 per cent in January, month-on-month, and were up 9.5 per cent on the year.
Although some industry experts are expecting pressure on crude oil prices to drive the Canadian Dollar lower in the months ahead, others are more optimistic about the ‘Loonie’s prospects.
One economist with the Desjardins Group offered this forecast for the commodity-driven currency; ‘The market priced more and more of a decrease in the key interest rate in Canada. It really put a lot of pressure on the downside for the Canadian Dollar actually, but we expect that to be only temporary. That’s why we are a bit more hawkish on the Canadian Dollar by the end of the year.’
Next week movement in the EUR/CAD pairing could be triggered by the ZEW economic sentiment survey for Germany, German/Eurozone services PMI, Eurozone consumer confidence figures and Canadian inflation data.
Euro (EUR) Exchange Rates
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Currency, ,Currency,Rate ,
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Euro,
Euro,
Euro,
Euro,
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