The current market bias for the EUR to CAD exchange rate is range-bound.
The interest rate differential remains crucial, as the European Central Bank (ECB) has kept rates unchanged while showing caution over a strong euro potentially dampening inflation. In contrast, the Bank of Canada (BoC) also maintained its rate at 2.25%, showing optimism about economic performance.
Recently, the euro has faced downward pressure due to concerns over inflation, while the Canadian dollar has been stable despite fluctuations in oil prices, which are crucial given Canada’s role as a major oil exporter. Canada’s retail sales data could also impact the CAD positively in the near term.
The expected trading range over the next few months suggests stability near current levels, influenced by macroeconomic indicators from both regions. Upside risks include improvements in Eurozone economic data or an unexpected increase in oil prices, whereas downside risks stem from renewed geopolitical tensions affecting the euro or weaker Canadian economic indicators.
