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Euro Canadian Dollar Update: EUR CAD Rate Dips despite Earlier Optimism from Draghi

The Euro has lost ground against the Canadian Dollar on Thursday’s afternoon session, in spite of well-received remarks from Mario Draghi.

The ECB President did not commit firmly to tapering off quantitative easing or raising interest rates, but instead adopted the tone of ‘wait and see’ during his press conference. Narrowing the time frame down, Draghi stated;

‘We will announce when we are ready. We think we are going to be ready for much of what we have to decide in October…if we are not then we postpone’.

Euro to Canadian Dollar trading saw a sharp rise to 1.4640 just before Draghi’s speech, but in spite of Euro gains elsewhere the single currency failed to remain strong against the Canadian Dollar later in the day.

(First published 11:21, September 7th, 2017)

While the Canadian Dollar has recently surged on domestic news, the Euro has proven the stronger currency by rising to an exchange rate of 1.4601.

This movement follows a surprise Bank of Canada (BOC) interest rate hike, which inspired an initial surge in CAD trading on Wednesday.

  • EUR CAD rate rises to 1.4601 – CAD EUR rate slips to 0.6846
  • Growing Euro strength enables EUR CAD rate rise – GDP revised up above estimates
  • CAD EUR rate slips despite BOC rate hike – Other movement suggests continued trader confidence
  • High Euro turbulence ahead on ECB meeting – Will CAD rise higher on jobs data?

The recent EUR CAD advance represents a recovery for the pairing, as before the BOC rate hike the Euro was trading near 1.4822; afterwards the pairing slipped to 1.4558.

Euro Traders Optimistic about ECB Policy Tightening Today

The fact that the Euro is up against the Canadian Dollar suggests that traders are putting more stock in the European Central Bank (ECB) as a source of positive news today.

Recent EUR gains have also been helped by good GDP news, which brought a higher-than-expected upwards revision for Q2 growth. This put annual GDP in the region of 2.3%, while quarterly GDP growth hit 0.6%.

Looking at the day’s big news, the ECB policy meeting, there are high hopes that the ECB officials will back monetary policy tightening. This has been the outlook of German Finance Minister Wolfgang Schauble, who stated on Wednesday that;

‘Unusual monetary policy implies it is not usual or normal — we should get back to a normal monetary policy. We have come back to a normal situation much quicker than people thought’.

Additionally, Deutsche Bank’s John Cryan has recommended lifting negative interest rates on the deposit facility, stating;

‘It can’t be forever that deposit taking is loss making…for banks’.

Canadian Dollar Resilient after BOC Interest Rate Hike

In the aftermath of an unexpected Bank of Canada (BOC) interest rate hike, the Canadian Dollar has dipped against the Euro but remained positive against most other peers.

This decision upset the forecasts of many economists, as the bank pushed rates from 0.75% to 1%. While other central banks occasionally use forward guidance to hint at future interest rate hikes, BOC officials implied a more flexible approach in the future;

‘Future monetary policy decisions are not predetermined and will be guided by incoming economic data and financial market developments as they inform the outlook for inflation’.

EUR CAD Outlook: Euro could Rally if ECB’s Draghi Backs Higher Interest Rates

All eyes are now on this afternoon’s ECB policy meeting. This will consist of an initial interest rate decision, followed by a speech from ECB President Mario Draghi.

Interest rates are not expected to change, but Draghi may cause a Euro surge by suggesting higher interest rates in the future. The President could also inspire EUR CAD gains by hinting at a tapering off of quantitative easing.

After the dust settles from this event, the next major news will be Friday’s Canadian jobs figures. Coming out over the afternoon, these are tipped to show higher employment but no overall change in the unemployment rate.

Current Interbank Exchange Rates

At the time of writing, the Euro to Canadian Dollar (EUR CAD) exchange rate was trading at 1.4608 and the Canadian Dollar to Euro (CAD EUR) exchange rate was trading at 0.6842.