CAD/EUR Outlook:
The CAD/EUR rate is slightly weaker but likely to move sideways, currently near its 3-month average and at 14-day lows. A lack of strong data releases from either Canada or the Eurozone contributes to this stable situation.
Key drivers:
• Rate gap: The Bank of Canada has adopted a cautious monetary policy, contrasting with the Eurozone’s stable rates, potentially putting pressure on the CAD.
• Risk/commodities: Oil prices are notably above their recent average, which usually supports the CAD; however, volatility in crude can create uncertainty for the currency.
• One macro factor: Germany's recent economic sentiment decline raises concerns, affecting the euro's stability and creating mixed signals.
Range:
The CAD/EUR is likely to drift within its recent narrow trading range, influenced primarily by geopolitical developments and oil price fluctuations.
What could change it:
• Upside risk: A significant stabilization in oil prices could strengthen the CAD.
• Downside risk: Continued economic weakness in Germany may exert additional pressure on the euro.
