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EUR/CAD Exchange Rate Fluctuates Before BOC Decision

The Euro (EUR) to Canadian Dollar (CAD) exchange rate has fluctuated today as the Euro was strengthened by domestic stimuli whilst the Canadian Dollar was buffeted by an increasingly volatile oil market.

The Euro itself has benefited from a run of positive data releases, the most significant of which was yesterday’s news that the German trade surplus has widened from 18.1bn to 22bn as exports continued to outpace imports.

Today, Italy’s industrial production figures also came in higher than expected, demonstrating an increase month-on-month from 0.7% and 2.8% year-on-year. Italy’s manufacturing sector output was also up 0.9% from April – 3.1% stronger than the comparable month last year.

Indeed, Italy’s economy has demonstrated noteworthy growth in recent months, enough to warrant some analysts upwardly revising their forecasts for its performance this year – the IMF, for example, revised its prediction of 0.8% growth to 1.3% for 2017.

The Euro gained against the Canadian Dollar today as a result, though its gains remain small as markets respond to rising rate hike bets for the Bank of Canada (BOC).

Bank of Canada (BOC) Rate Hike Bets Surge to 86%

The Bank of Canada (BOC) is due to make its highly anticipated rate hike decision tomorrow, and overnight index swaps are currently predicting an 86% chance of an increase at the event – a significant change in consensus, as only a week ago surveys predicted that there would be no rate hikes at the June 12th meeting.

Indeed, conversely there remains many doves who are unconvinced by the hawkish predictions; forecasters surveyed by Bloomberg, including the Imperial Bank of Commerce and the Toronto-Dominion Bank, continue to bet that interest rates will remain the same.

Regardless, many have bought into the Canadian Dollar in response to predictions that a rise will occur, although not enough to effectively bolster the ‘Loonie’ against the Euro as dwindling crude oil prices and an increasingly volatile and oversupplied oil market have taken their toll.

Canadian Dollar Weakened by Dwindling Oil Prices

Whilst the Canadian Dollar has been propelled by the furore surrounding BoC interest rate hike bets, it has, regardless, been weakened by dwindling oil prices and the threat of oversupply.

Volatility within the crude oil market has predominantly resulted from global oversupply, something that has worsened due to production in Nigeria and Libya surging to an output of 350,000 barrels a day, reversing over a quarter of the cuts previously achieved by OPEC within the first four months of this year.

As you can imagine, this has weighed on crude oil, and with the Canadian Dollar being so heavily correlated, it too has come under pressure.

Current Interbank Exchange Rates

At the time of writing the Euro to Canadian Dollar (EUR CAD) exchange rate is trading at 1.4728. Conversely the Canadian Dollar to Euro (CAD EUR) exchange rate is trading at 0.6788.