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Euro to Canadian Dollar (EUR/CAD) Exchange Rate Forecast: ‘Loonie’ Climbs as Final German Inflation Falls, CA Housing Prices Ahead

The Euro to Canadian Dollar (EUR/CAD) exchange rate fell in the first half of Thursday’s European trading  after the final German Consumer Price Index (CPI) dipped further than initially forecast, to -0.4% on the year in January.

Eurozone Industrial Production will be released later in the session and could offer the Euro to Canadian Dollar (EUR/CAD) exchange rate some stability if favourable.

Earlier… The Euro to Canadian Dollar (EUR/CAD) exchange rate gained as Greece negotiations continued and the Bank of Canada (BOC) threatened to cut rates.

The Canadian central bank recently placed a cat amongst the pigeons when it became one of the first major central banks to cut interest rates in recent years. The Canadian benchmark interest rate had resided at 1.0% for four years before the BOC bombshell.

Other central banks have since followed suit as a global slowdown threatens to subdue growth. The BOC felt the need to hack rates as the price of oil plummeted by around 60% since mid-2014—not a positive development for Canada’s largest export.

BOC Senior Deputy Governor Carolyn Wilkins hinted this week that the central bank is prepared to decrease rates again if needed. Slack in the employment sector twinned with the oil price tumble are both factors that could keep Canadian inflation below the 2.0% target.

Wilkins stated: ‘Monetary policy is contributing to this effort by providing an environment of low and stable inflation, while supporting the adjustments needed to return the economy to sustained and balanced growth.’

‘The oil-price shock increased the downside risks to inflation, particularly given the uncertainty about the strength and timing of the offsets coming from the stronger US economy and a weaker Canadian Dollar.’

However, Wilkins also suggested the BOC had tools to deal with the recent oil price decline and would be willing to use them if necessary.

Economist Randall Bartlett weighed in, saying: ‘The Bank of Canada is focused on the negatives and the rest of us are too.’

Meanwhile, the Euro is highly responsive to any developments occurring in negotiations between Greece and the troika. The Euro to Pound Sterling (EUR/GBP) exchange rate fell to a seven-year low of 73.99 pence as Greek woes weighed down the single currency.

Market analyst Michael Hewson commented: ‘It is hard to be anything other than pessimistic about the outcome of what is unfolding in Europe, with respect to Greece and its negotiations with its creditors, as the negotiations continue to resemble a form of Mexican stand-off, or a game of Russian roulette.’

Euro to Canadian Dollar (EUR/CAD) Exchange Rate Forecast

The Euro to Canadian Dollar (EUR/CAD) exchange rate could fluctuate as a result of Thursday’s Eurozone finance minister meeting and any statements from European Central Bank (ECB) officials.

Canadian domestic data is a little thin on the ground this week, meaning Thursday’s Canadian New Housing Price Index may have more of an impact on the ‘Loonie’ to Euro (CAD/EUR) exchange rate than it usually would.

Any changes in the price of commodities such as oil will play a great part in Canadian Dollar movement.

The Euro to Canadian Dollar (EUR/CAD) exchange rate resides at 1.4277. The Canadian Dollar to Euro (CAD/EUR) exchange rate is trending in the region of 0.7008.