Euro to Canadian Dollar (EUR/CAD) Exchange Rate Falls to 1.3861
The Euro broadly softened as Syriza was named the victor of the Greek general election.
As a win for the anti-austerity party put talks of a Grexit firmly back on the table, demand for the Euro waned instantly and the common currency lost ground against Sterling, the US Dollar and the Canadian Dollar.
As we discover more about Syriza’s plans for Greece, the EUR/CAD exchange rate is likely to experience further movement.
The Euro to Canadian Dollar (EUR/CAD) exchange rate moved between lows of 1.38 and highs of 1.44 this week as both the Bank of Canada (BOC) and European Central Bank (ECB) took markets by surprise.
EUR/CAD Exchange Rate Pressured by Rate Cuts and QE Programme
The Euro surged against the Canadian Dollar after the BOC opted to break four years of static policy and cut the benchmark interest rate from 1.0% to 0.75%.
The central bank’s decision was driven by the recent plunge in the price of crude oil, Canada’s main commodity, and caused broad-based ‘Loonie’ losses.
Industry expert Luke Bartholomew said of the decision; ‘Barely six months ago a lot of people thought Canada would be the first of the big economies to raise rates. The oil price collapse has changed all that by pushing inflation lower and being negative for the overall economy.’
However, the common currency’s supremacy over its Canadian peer didn’t last long and the EUR/CAD pairing shed gains in the wake of the European Central Bank’s (ECB) own interest rate announcement.
The central bank has been shrouded in quantitative easing speculation for months and finally bit the bullet on Thursday.
As the quantitative easing scheme outlined by the central bank will last longer (18 months) and be more extensive (amounting to over 1 trillion Euros) than economists expected, the Euro was subjected to a serious beating following ECB President Mario Draghi’s announcement.
As well as shedding its gains against the Canadian Dollar, the Euro dropped to an 11-year low against the US Dollar and a 7-year low against the Pound.
Economist Jurgen Odenius states; ‘The downside for the Euro is substantial. The channel through which Draghi’s hoping to achieve an increase in inflation is through a weaker Euro.’
On Friday Canada published its inflation data and the pace of consumer price gains was shown to have slowed.
As stated by economist Douglas Porter; ‘Looking past the dramatic dive in gasoline prices, there is precious little indication that underlying Canadian inflation trends are being dragged down by the plunge in oil prices. On the contrary, core inflation appears pegged above the two% threshold for some time yet, especially with the upward pressure from a weakening exchange rate.’
The recent developments have led to investors betting that both the Reserve Bank of Australia and Reserve Bank of New Zealand might follow the trend and cut interest rates in order to combat global economic pressures, sliding commodity prices and the threat of lower inflation.
Euro to Canadian Dollar (EUR/CAD) Exchange Rate Forecast
The repercussions from the BOC and ECB decisions are likely to be felt for some time, but this week’s economic reports for the Eurozone and Canada will also be causing movement in the Euro to Canadian Dollar currency pairing.
Canadian reports are sparse, with the nation’s only notable ecostat being Gross Domestic Product figures for November.
Canada’s economy is believed to have expanded by 0.1% on the month in November, down from growth of 0.3% the previous month.
If growth is shown to have slowed by more than this, it could spell trouble for the Canadian Dollar.
The Euro, meanwhile, could come under pressure as a result of the nation’s inflation and employment figures.
A worsening in the Eurozone’s disinflationary pressures would justify the ECB’s recent stimulus decision, but would also fuel concerns that the measures rolled out by the central bank aren’t enough to counter the region’s problems.
At the close of the week the Euro to Canadian Dollar (EUR/CAD) exchange rate was trading in the region of 1.3927, down from a high of 1.4092
On Friday the Canadian Dollar to Euro (CAD/EUR) exchange rate was trading in the region of 0.7155, up from a low of 0.7001