The Euro to Canadian Dollar (EUR/CAD) exchange rate gave up earlier gains on Wednesday afternoon after expectations that the European Central Bank (ECB) will announce the implementation of a quantitative easing programme at next week’s monetary policy meeting.
Earlier in the session, the Canadian currency weakened against the Euro as falling oil and metal prices weighed heavily upon the commodity-based currency. Also dragging the ‘Loonie’ lower was news that the World Bank had cut its forecast for global economic growth for this year and 2016.
In its twice-yearly global economic prospects, the World Bank forecasts that the world’s economy will expand by 3% in 2015 and by 3.3% in 2016. The growth prediction was less than the one it made back in June 2014. Back then, the bank had been expecting global growth figures of 3.4% and 3.5% respectively.
As Canada is a major exporter of oil, the recent and continuing decline in oil prices has had a major negative effect upon the nation’s economy. Since June, last year oil prices have fallen by a massive 60%.
“We have quite bearish oil supply fundamentals, while there is still a slowdown in global oil demand growth,” said Myrto Sokou, senior research analyst at Sucden Financial. “We are all of us just waiting to see where the bottom is.”
The price slide increased in speed at the end of November after OPEC made it clear it wouldn’t cut production to support prices and many big energy companies have responded by dramatically cutting back on spending plans. The United Arab Emirates and Saudi Arabia reaffirmed that stance earlier in the week.
The Euro then went onto the back foot after traders concluded that the interim ruling made by the European Court of Justice for a 2012 monetary easing option now clears the way for the launching of a full-scale quantitative easing programme.
Also weighing on the single currency are concerns over the upcoming Greek general election and potential political uncertainty in Italy as President Giorgio Napolitano announced his resignation. The departure of the elderly president could create problems for Prime Minister Matteo Renzi who now has to find a replacement that will back his reform plans.
Euro Exchange Rates:
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