With Canadian economic news in short supply the ‘Loonie’ has been trading in a fairly narrow range against peers like the Euro.
The commodity-driven asset dropped yesterday as emerging-market currency concern and falling commodity prices took a toll.
Last week’s less-than-impressive Chinese manufacturing figures also continued to weigh on the Canadian Dollar.
Meanwhile, despite putting in a pretty patchy performance following the publication of the German import price index, the Euro remained supported by yesterday’s comments from European Central Bank official and Bundesbank President Jens Weidmann.
Weidmann stressed that the central bank can be relied upon to guide the Eurozone forward and that it will increase interest rates as soon as external conditions make it necessary.
The Bundesbank chief also reiterated remarks made by ECB President Mario Draghi regarding the gradual nature of the Eurozone’s economic recovery.
Furthermore, although many investors have been concerned about slowing inflation in the currency bloc, Weidmann was quick to dismiss these fears.
The Euro’s gains on the Canadian Dollar were aided by speculation that Bank of Canada Governor Stephen Poloz is working to drive down the currency.
Poloz has repeatedly stressed the importance of boosting exports, and having a weaker domestic currency would help the nation stay competitive.
Since Poloz took over as BOC Governor the ‘Loonie’ has shed 7.5 per cent against the US Dollar and has weakened considerably against its strengthening European counterparts – the Pound and Euro.
In the opinion of economist Craig Wright; ‘There is a perception that there is a preference for a weaker currency out of Ottawa. I don’t know if they are encouraging a softer currency as explicitly as Australia, but there is a perception that they aren’t terribly worried by a weaker currency.’
If tomorrow’s German consumer confidence report shows improvement, like the German business climate/expectations figures did yesterday, we forecast that the EUR/CAD pairing will extend gains.
Of course, investors will also be looking ahead to Friday’s Canadian growth data and Eurozone inflation/unemployment figures.
Euro (EUR) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,,British Pound,0.8229 ,
Euro,,New Zealand Dollar,1.6472,
Euro,,Canadian Dollar,1.5226 ,