The Euro to Canadian Dollar (EUR/CAD) exchange rate firmed on Tuesday despite Bank of Canada Governor Stephen Poloz delivering an upbeat speech on the outlook of the Canadian economy.
The Euro to Canadian Dollar (EUR/CAD) Exchange Rate Touched a Session Low of 1.3143
Fears that the Canadian economy would be hit hard by the sharp oil price declines seen earlier in the year have eased as prices show signs of making a recovery.
‘While the damage to Canada’s economy from the oil price shock is happening faster than initially expected, it does not appear to be larger than we anticipated in January. Outside of the energy sector, other areas of the economy appear to be doing well. Our outlook is for the positives to begin to reassert themselves during the second quarter, and to do so clearly in the second half of the year. The central bank’s interest rate cut in January, together with the declines in the Canadian Dollar are working to speed up the transition,’ Governor Poloz said.
The comments caused investors to raise their bets that the Canadian central bank will not choose to make further interest rate cuts at its next policy meeting.
The Euro meanwhile found support from growing optimism that a deal will be reached between Greece and its creditors in the Eurozone. Greek Prime Minister Alexis Tsipras reshuffled the team handling talks with the nation’s international lenders, suggesting that a deal could be achieved by early May.
‘The modus operandi of the Euro zone is to seek compromise and to avoid incalculable risks. Especially after the 2008 global financial and economic crisis, risk aversion is so strongly entrenched in every single international organisation that few political leaders are prepared to gamble on Grexit. Against the backdrop of a fragile Euro zone economic recovery and the tense geopolitics over Russia/Ukraine, letting go of Greece would mean stepping into “uncharted waters” as Mario Draghi, ECB president, put it. No matter what they might say about the euro zone being “ring-fenced” against contagion, and no matter how frustrated they are with Mr Varoufakis et al, Euro zone political leaders do not want a Grexit,’ said Joan Hoey from the Economist Intelligence Unit.
US Dollar (USD) Exchange Rate Falls as Consumer Confidence Drops
A weaker US Dollar was also offering support to the Euro.
The ‘Greenback’ weakened further after the Conference Board’s index of consumer confidence decreased unexpectedly from a reading of 101.4 to 95.2 in April. Economists had been forecasting for the index to increase to 102.5.
As a result of the weak data the Euro advanced to its best level in a month against the US Dollar.