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Euro Surges Against Canadian Dollar as US Production Pressures Oil Prices

Markets were relieved to find that President Emmanuel Macron had secured an absolute majority in the French parliamentary election, increasing his power to push for economic reforms.

This helped to bolster confidence in the outlook of the Eurozone as a whole, suggesting that the threat of political uncertainty on the continent has diminished further.

Although voter turnout was at a historic low this failed to particularly dampen the mood of investors, encouraging the Euro to trend higher against most of the majors on Monday morning.

However, as analysts at Brown Brothers Harriman noted:

‘The fear of a populist-nationalist wave sweeping across Europe seemed to rise a bit after Brexit but accelerated with Trump’s victory in the US. It was a distraction from the underlying structural issues in Europe. These have not been addressed. ECB President Draghi continues to plea for countries to implement structural reforms. The European Union itself has structural issues and institutional challenges, with or without the Britain.’

Lingering concerns over the health of the Eurozone economy are likely to limit the strength of the single currency, particularly if the latest European Central Bank (ECB) economic bulletin proves dovish.

As policymakers are unlikely to shift towards a monetary tightening bias in the foreseeable future the Euro Canadian Dollar exchange rate could struggle to maintain its bullish form.

On the other hand, if the ECB appears to be taking an optimistic view then the Euro could extend its gains across the board.

Oil Worries Continue to Limit CAD Appeal

The commodity-correlated Canadian Dollar, meanwhile, remained under pressure thanks to the persistent weakness of oil prices.

Brent crude remained trapped beneath the US$48 per barrel mark, still weighed down by worries over the persistent global oversupply glut and rising US production.

Analysts remain generally pessimistic over the outlook of the oil market, with prices unlikely to significantly recover for some time to come.

Further softness could be in store for the ‘Loonie’ later in the week, with May’s consumer price index forecast to have dipped slightly on both the month and the year.

Any moderation in the inflation rate could undermine speculation that the Bank of Canada (BOC) will raise interest rates before the end of the year, reducing confidence in the domestic economy.

However, a strong showing here could add to the optimism of policymakers, leaving the EUR CAD exchange rate exposed to further downside pressure.

If risk appetite generally picks up, though, the Canadian Dollar could find some measure of support.

Current EUR CAD Interbank Exchange Rates

At the time of writing, the Euro Canadian Dollar exchange rate was making gains in the region of 1.4779. The Canadian Dollar Euro exchange rate was trending lower at 0.6761.