UPDATE
The Euro to Canadian Dollar (EUR/CAD) exchange rate was trending within a narrow range on Friday morning.
The single currency edged lower versus its major peers on Friday morning as Germany prepares to vote on the terms of the latest Greek bailout deal. Even if German MPs accept the deal, there is likely to be dissent within the government ranks with so many German officials favouring a temporary Grexit to the current deal.
The Canadian Dollar, meanwhile, softened versus its major rivals as a result of crude prices holing a weak position. Although prices edged higher on Thursday, the Iran nuclear deal is likely to weigh on prices for some time to come.
The Euro to Canadian Dollar (EUR/CAD) exchange rate is currently trending in the region of 1.4116.
Yesterday…
The Euro to Canadian Dollar (EUR/CAD) exchange rate softened by around -0.33% on Thursday afternoon.
Euro (EUR) Exchange Rate Forecast to Soften against the ‘Loonie’ (CAD) on Potential Cabinet Reshuffle
As Greek MPs gathered to vote on whether or not to accept the terms for bailout funds, anti-austerity protestors took to the street. Armed with Molotov cocktails, rioters showed distain for a government which has done the complete opposite to their electoral pledges. Police were forced to disperse crowds using tear gas as the MPs voted to accept the deal. However, many Syriza MPs voted against the measures imposed by European officials which is likely to result in a complete cabinet reshuffle and potentially a snap election. Prime Minister Alexis Tsipras has certainly lost his authority and could resort to forming a unity government.
As a result of the turmoil in Greece and uncertainty as to whether Tsipras can hold the embattled country together, the shared currency dived versus its major peers. Focus will now turn to the European Central Bank (ECB) interest rate decision. Although it is unlikely we will see any major policy changes at this time, the ECB may address the extension of quantitative easing to stem the damage caused by geopolitical upheaval. In addition, the Frankfurt-based central bank will likely discuss Emergency Liquidity Assistance (ELA) for Greek banks and whether to extend the program. However, any move will likely be small given that Germany are yet to approve the Greek bailout deal and political uncertainties in Greece could see significant changes.
The Euro to Canadian Dollar (EUR/CAD) exchange rate is currently trending in the region of 1.4096.
Canadian Dollar (CAD) Exchange Rate Forecast to Strengthen against the Single Currency (EUR) Despite BOC Rate Cut
Despite the fact the Bank of Canada (BOC) cut the benchmark interest rate from 0.75% to 0.50% on Wednesday, the ‘Loonie’ (CAD) recovered some of its losses versus many of its rivals on Thursday. This is due to the fact that the rate cut was expected by most economists and traders had already priced it in to a large extent. The rate cut was the result of low crude prices weighing on Canadian exports and the nation being forecast to have entered a technical recession in the second quarter. With Iran having finally agreed a deal to temper its nuclear program in exchange for lifting sanctions on oil production, oil prices are likely to remain low for a significant time to come.
‘Loonie’ gains are likely to be short-lived, however, as the situation in Greece weighs on risk sentiment. In addition, whilst Federal Reserve Chairwoman Janet Yellen stokes bets as to a 2015 rate hike; policy divergence between the neighbouring nations could weigh on demand for the Canadian Dollar.
The Euro to Canadian Dollar (EUR/CAD) exchange rate dropped to a low of 1.4090 today.
Euro to Canadian Dollar (EUR/CAD) Exchange Rate Forecast to Hold Losses as Germany Votes on Greek Deal
Given that the terms of the Greek deal have yet to be accepted by Germany, the shared currency is likely to hold losses versus its major peers ahead of the vote. With many German politicians favouring a temporary Greek exit from the Eurozone over the current deal, there is still potential for massive changes in Europe. Therefore, the Euro to Canadian Dollar (EUR/CAD) exchange rate is likely to hold losses for the remainder of Thursday’s European session.
Friday will be of particular significance to those invested in the Canadian asset with inflation data due for publication. European data will be of less importance with geopolitical developments dominating trader focus.
The Euro to Canadian Dollar (EUR/CAD) exchange rate climbed to a high of 1.4150 today.
