Another quiet news day for Canada helped the ‘Loonie’ consolidate recent gains against the Euro.
The Canadian Dollar was boosted and able to advance on the European asset as crude oil, Canada’s most important export, jumped to a two week high amid hopes that signs of economic improvement in the US will sustain demand.
Although today’s US housing starts and building permits data failed to meet expectations, industrial production expanded by 0.3 per cent as forecast and manufacturing production climbed by 0.4 per cent, better than the 0.3 per cent expected.
Meanwhile, copper (another key commodity) was headed for its first five-day gain in three weeks as the improving global outlook boosted the assets’ appeal.
The Canadian Dollar’s advance on the Euro was aided by the news that the pace of construction output in the Eurozone dropped in November, marking a third consecutive month of declines.
After dipping in September construction output fell by 1.2 per cent in October, month-on-month, and now data has revealed a further 0.6 per cent decline in November.
On the year construction output was down by 1.7 per cent.
However, news that the University of Michigan Confidence index slipped from 82.5 to 80.4 in January instead of climbing to 83.5 as forecast could cause commodities to fluctuate in the hours ahead and dampen the ‘Loonie’s appeal in the process.
Although investors are speculating that the Federal Reserve is committed to its tapering course, too many disappointing US reports could encourage them to rethink their position.
Furthermore, as the US is Canada’s biggest trading partner signs of economic weakness in the former country could affect the fortunes of the latter and leave the Canadian Dollar softer.
Next week EUR/CAD movement could be occasioned by several economic reports and the Bank of Canada’s rate decision.
The central bank is expected to leave fiscal policy unaltered but could adopt a dovish tone regarding the possibility of rates being held at record lows for longer.
If the BOC does indeed indicate that rates won’t be lifted or makes any reference to the possibility of an additional rate cut the Canadian Dollar could fall beyond its recent lows.
German ZEW economic sentiment/current situation surveys could also have an impact as both are forecast to show improvement and could help the Euro climb.
Consequently, while the ‘Loonie’ might be holding on to gains against the Euro at the moment, expectations surrounding next week’s developments lead us to give the EUR/CAD pairing a neutral-positive currency forecast.
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,0.8258 ,
Euro,,New Zealand Dollar,1.6446,
Euro,,Canadian Dollar,1.4872 ,