CAD/EUR Outlook:
The outlook for CAD/EUR is slightly positive, but likely to move sideways as it trades just above its recent average and near recent highs.
Key drivers:
- Rate gap: The Bank of Canada has maintained a cautious stance, while the European Central Bank keeps its rate steady, creating a clear interest rate advantage for the euro.
- Risk/commodities: Rising oil prices, now at recent highs, bolster the Canadian dollar, enhancing its appeal as a major oil exporter during periods of higher demand.
- One macro factor: Eurozone inflation has fallen below the ECB's target, signaling potential for future rate cuts, which may weigh on the euro's value.
Range:
The CAD/EUR is likely to drift within its recent 3-month range, supported by oil price movements.
What could change it:
- Upside risk: A sustained increase in oil prices could further strengthen the CAD.
- Downside risk: Evidence of economic weakness in the Eurozone could prompt traders to favor the euro, leading to a stronger EUR against the CAD.
