Bias: The CAD/EUR exchange rate is currently bullish-to-range-bound, as it is above the 90-day average and in the upper half of the 3-month range.
Key drivers:
- Rate gap: The Bank of Canada has cut interest rates recently, while the European Central Bank is likely to maintain a neutral policy, creating a favorable rate differential for the CAD.
- Risk/commodities: Oil prices are slightly above their 3-month average, supporting the Canadian dollar due to Canada's status as a major oil exporter.
- Eurozone economic growth: Slower growth forecasts and disappointing trade data from Germany have kept pressure on the euro's performance.
Range: The CAD/EUR exchange rate is expected to hold steady within its recent range with potential for slight upward movement based on oil price trends.
What could change it:
- Upside risk: A sharp rise in oil prices could further strengthen the CAD.
- Downside risk: Increased unemployment in Canada or negative economic data could pressure the CAD lower.