CAD/EUR Outlook: Slightly positive, but likely to move sideways as the rate is just above the recent average and near recent highs, with mixed signals in the market.
Key drivers:
• Rate gap: The Bank of Canada has maintained its interest rate while the European Central Bank is expected to hold rates steady, limiting any interest rate advantage for the EUR.
• Risk/commodities: Oil prices are at multi-month highs, providing strong support for the Canadian dollar as it enhances export revenues.
• One macro factor: The recent trade agreement between Canada and China may boost Canada's trade outlook, positively influencing the CAD.
Range: The CAD/EUR is likely to hold steady within its recent range amid prevailing conditions.
What could change it:
• Upside risk: A sustained increase in oil prices could further strengthen the CAD.
• Downside risk: If the Eurozone GDP growth data disappoints, it may weaken the EUR and, in turn, affect the CAD/EUR exchange rate negatively.
