CAD/EUR Outlook: Slightly weaker, but likely to move sideways, given it’s below the recent average and within a stable range.
Key drivers:
• Rate gap: The Bank of Canada recently cut interest rates, while the European Central Bank is maintaining its current rates, putting pressure on the CAD versus the EUR.
• Risk/commodities: Oil prices have risen sharply, affecting the CAD positively, but their recent volatility suggests uncertainty remains for the loonie's strength.
• One macro factor: Eurozone inflation is projected to decrease, creating an environment where the EUR might remain stable against the CAD.
Range: Expect CAD/EUR to drift within its recent 1.5% range as dynamics between both currencies balance out.
What could change it:
• Upside risk: A significant rise in oil prices could bolster the CAD, potentially lifting it against the EUR.
• Downside risk: Further weakness in the Canadian economy or disappointing upcoming economic data could lead to a steeper decline in the CAD.
