The Euro Canadian Dollar (EUR CAD) exchange rate slipped again this morning as German factory orders contracted in April.
Euro (EUR) Falters as German Orders Plummet
The Euro slid by almost half a cent on Wednesday morning as the latest German industrial data showed that factory orders contracted more than expected at the start of the second quarter.
After rising for two consecutive months, orders slumped from 1.1% to -2.1% in April, contracting at a far faster pace than the drop to -0.4% that most economists had forecast.
The drop was largely attributed to a marked fall in foreign demand according to the data released by Germany’s Economy Ministry this morning, with orders from within the Euro area sliding by 1.4% whilst demand from countries outside the Eurozone plummeted by 4.8%.
Whilst factory orders are traditionally quite volatile, often fluctuating wildly from month-to-month, the latest data suggests that Europe’s largest economy may be steadying after a strong start to the first quarter.
However many analysts remain confident that Germany’s economic prospects are still upbeat, with many economic indicators suggesting that Germany’s manufacturing sector will continue to show growth in the coming months.
The Economy Ministry said in its accompanying statement;
‘Slight upward momentum in output and sales as well as stellar business climate send strong signals for a continuation of the moderate upswing in manufacturing.’
Uptick in Oil Prices Strengthens Canadian Dollar (CAD)
The Canadian Dollar was bolstered this morning as oil prices began to push higher again after tumbling earlier in the week following a diplomatic rift in the Middle East.
Oil prices tumbled in the first half of the week as a move by several Arab states to sever ties with Qatar caused investors to worry about the implementation of a new OPEC agreement to extend oil production cuts into 2018.
However crude benchmarks rallied once again this morning, pushing past $48 a barrel as the American Petroleum Institute (API) suggested that US crude stocks contracted at a faster pace than expected last week.
While the official data won’t be released until later this afternoon, a larger than expected decline in US inventories should help to prop up oil prices as it suggests that the OPEC production cuts will have a larger impact on reducing global surplus.
EUR CAD Forecast: ECB Monetary Policy Meeting Ahead
The EUR CAD exchange rate may tumble further on Thursday as the European Central Bank (ECB) meets to make its latest rate decision.
Investors are likely to be left disappointed by tomorrow’s meeting as despite signs that the Eurozone economy has almost completely recovered from the crisis in 2012 the bank is likely to leave its ultra-loose monetary policy in place, with little sign that it will seek to alter this in the near future.
Meanwhile the Canadian Dollar may also weaken depending on the tone of a Bank of Canada (BoC) press conference tomorrow, with a dovish outlook from the bank likely to weigh on the ‘Loonie’.
Current Interbank Exchange Rates
At the time of writing the EUR CAD exchange rate was trending around 1.5130 and the CAD EUR exchange rate was trending around 0.6608.