The EUR to CAD market bias is currently range-bound, with both currencies facing mixed influences.
The interest rate differential remains a crucial factor. The European Central Bank (ECB) has held rates steady, while the Bank of Canada maintained its policy rate, showing a cautious but optimistic outlook on the Canadian economy. Risk sentiment is less favorable for the euro as concerns about inflation and the war in Ukraine introduce volatility. In contrast, Canada’s strong job growth and potential retail sales boosts suggest a more stable economic environment for the CAD.
Over the next one to three months, expect the EUR to CAD to trade within a narrow range around recent levels, staying close to its 3-month average. The market has shown stability, trading within a 2.1% range, despite the euro's recent downward movement.
Upside risks for the euro could arise from stronger-than-anticipated economic growth in the Eurozone, particularly with improving consumer confidence in Germany. Conversely, renewed geopolitical tensions or a significant drop in oil prices could exert downward pressure on the Canadian dollar, impacting the EUR to CAD exchange rate.
