The Euro to Canadian Dollar (EUR/CAD) exchange rate fell in Tuesday’s session ahead of the Eurozone Producer Price Index.
The Canadian Manufacturing Purchasing Managers Index (PMI) declined on Monday from 53.9 to 51.0.
The Euro to Canadian Dollar (EUR/CAD) exchange rate fell in the second half of Monday’s European trading as the price of oil regained strength, climbing above $55 Dollars per barrel.
Commerzbank analysts stated: ‘Most market observers have been surprised by the scale of the decrease, and expectations of US oil output this year will no doubt be lowered accordingly. The foundation for a steady price recovery in the second half of the year has thus been laid.’
The Euro to Canadian Dollar (EUR/CAD) exchange rate registered losses early in Monday’s European trading as oil extended its decline.
Oil Prices Weigh on Canadian Dollar to Euro (CAD/EUR) Exchange Rate
As a commodity currency, the ‘Loonie’ exchange rate is extremely sensitive to any fluctuations in the price of its largest export, oil. Activity in China’s manufacturing sector slowed for the second consecutive month in January, lessening demand for black gold.
Morgan Stanley stated: ‘Manufacturing activities are likely weakening amid slackening demand growth, even taking potential distortion from Lunar New Year (Feb 19th) into account.’
However, US shale oil production has declined swiftly as the price of the commodity continues to tumble amid a global glut due to high production.
Nomura stated: ‘Oil production in the shale basins will inevitably decrease as weaker, higher-cost producers shutter their operations. This supports our view that oil prices will recover this year and average $60 a barrel for Brent.’
Furthermore, fears for the Canadian economy are growing, with some suggesting lower oil prices and a resiliently strong US Dollar could hinder growth.
Industry expert Brad Eldredge commented: ‘Gas prices are extremely low and that should help tourism. It makes it cheaper to drive here and hopefully fly here. But as the American Dollar continues to go up, that could hurt the (tourism) industry in terms of international visitors.’
Meanwhile, the Euro remained sturdy against other majors despite a decrease in final French and German Markit Manufacturing Purchasing Managers Indexes (PMI).
The French ecostat fell from the 49.5 to 49.2 in January, while the German ecostat resided at 50.9 from December’s 51.2.
Markit economist Oliver Kolodseike commented: ‘January’s PMI results paint a somewhat mixed picture of the health of the German manufacturing economy. While production growth accelerated slightly on the month, it remained relatively low by historical standards and well below levels seen at the start of last year.’
‘Furthermore, the employment growth slowed to a fractional pace and new orders rose only marginally, as a slight fall in new export business weighed on total demand.’
Euro to Canadian Dollar (EUR/CAD) Exchange Rate Forecast
The Canadian Dollar to Euro (CAD/EUR) exchange rate could fluctuate further in Monday’s session with the release of Canadian Manufacturing PMI later in the day. The index resided at 53.9 in December and any further climb above 50.0 into growth territory could offer the ‘Loonie’ exchange rate some support.
However, Canadian Dollar to Euro (CAD/EUR) exchange rate gains may be difficult to come by as the price of oil remains low.
In addition, European Central Bank (ECB) official Ewald Nowotny is expected to speak later in Monday’s session on the topic of monetary policy, which could prove to be an event for the Euro.
The Euro to Canadian Dollar (EUR/CAD) exchange rate is trending in the region of 1.4465. The Canadian Dollar to Euro (CAD/EUR) is residing at 0.6916.