CAD/EUR Outlook:
The CAD/EUR exchange rate is likely to move sideways as it hovers near the recent average with mixed signals from drivers. Recent oil price strength supports the CAD, yet uncertainty in Eurozone consumer confidence could limit any gains.
Key drivers:
• Rate gap: The Bank of Canada's cautious monetary policy contrasts with that of the European Central Bank, which is expected to maintain its accommodative stance.
• Risk/commodities: The Canadian dollar benefits from a rise in oil prices, currently at 90-day highs, significantly boosting its appeal as a commodity-linked currency.
• One macro factor: Recent Eurozone consumer confidence data fell short of expectations, keeping the euro on the defensive and affecting its ability to strengthen.
Range:
Expect the CAD/EUR to hold within its recent range as both currencies react to domestic economic indicators and global conditions.
What could change it:
• Upside risk: A significant rise in Canadian retail sales could strengthen the CAD further.
• Downside risk: Continued weakness in Eurozone economic data may weaken the EUR, but any geopolitical escalation could dampen broader market confidence.
