Euro to Canadian Dollar (EUR/CAD) Exchange Rate Advances
The Euro to Canadian Dollar Exchange Rate advanced to its strongest level in a week as the Bank of Canada (BoC) surprised the financial markets by cutting its benchmark interest rates and entering the global currency war.
Canada’s shock move was made in attempt to tackle the negative impacts of tumbling oil prices and to prevent financial instability that could occur because of a vulnerable domestic housing market. The move also brought to an end the longest period of unchanged interest rates since the 1950’s.
Rates were cut from the 1% where it had been since September 2010 to 0.75% in response the negative impacts of weak oil prices. The Bank of Canada also warned that low oil prices would negatively affect the overall economy over the course of 2015 and hurt business investment.
Threats to the nation’s financial stability were also highlighted due to job losses and falling incomes. Concerns are also high that the price decline could trigger a crash in the nation’s housing market.
‘The extent to which the downturn already evident in Alberta will spill over into other regions remains to be seen. The ramifications of the oil-price shock for household imbalances will depend importantly on the impact of the shock on income and employment,’ the bank pointed out in its monetary policy report.
Oil prices have plunged by a massive 55% since last June and more falls are likely as oil producers refuse to slow production and ease a global supply glut. As Canada is a major producer of the commodity, its economy has received a battering from the steep price drops.
‘The considerably lower profile for oil prices will be unambiguously negative for the Canadian economy in 2015 and subsequent years. A soft landing in the housing sector continues to be the most likely scenario. A disorderly unwinding of household imbalances could have sizable negative effects on the economy and inflation,’ said the bank in a statement.
Also weighing on the Canadian Dollar was the Central Bank cutting its economic growth forecasts for the coming year.
The Canadian economy is now forecast to grow by just 1.5% in the first half of 2015, less than the 2.4% predicted in October, and thus the output gap will widen. The bank also cut its 2015 growth outlook to 2.1% from 2.4%, compared with the
International Monetary Fund’s (IMF) prediction earlier this week of 2.3%.
Euro Exchange Rate News:
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