The Euro to Canadian Dollar (EUR/CAD) exchange rate weakened on Monday as Eurozone data suggested that the region’s economic recovery remains vulnerable. Rising oil prices supported the ‘Loonie’.
The Euro to Canadian Dollar (EUR/CAD) Exchange Rate Weakened To a Session Low Of 1.3095
The Canadian currency continued to receive support on Monday following an interview over the weekend. Bank of Canada (BoC) governor Stephen Poloz told the Wall Street Journal that he did not see the need for more interest rate cuts for now. He added that policy makers might consider further rate cuts if the economy begins to underperform.
The BoC held rates last Wednesday after policy makers said that they expect the Canadian economy will rebound later this year from the first quarters zero growth rate.
Poloz added that he expects to see the US economy (Canada’s biggest trading partner) shrug off its recent run of soft data.
‘We think the trajectory is quite good. Our best judgement is this little period of a few months of off colour data has constituted a wobble in the US economy. If it were not for the weather and the port strike, I do not think we would be talking about it. We are expecting the second quarter to come back nicely, good growth rates for the rest of this year,’ said Poloz.
Also supporting the Canadian Dollar was another rise in global oil prices. As Canada is a major exporter of oil, an upward movement in the commodity’s price often has a positive impact on the currency.
Global oil prices have dropped 50% since last year due to an oversupply in the market. In November 2014, the Organization of Petroleum Exporting Countries (OPEC) decided not to reduce oil output levels, which contributed to a further slump in prices.
Oil prices rose at the start of the week due to a combination of factors. Fighting in Yemen escalated on Monday, causing some oil traders to speculate that oil supplies from the Middle East could be disrupted. With fighting occurring in Libya, Syria, Iraq and now Yemen, production out of OPEC nations could come under pressure.
Prices were also supported by a report, which showed that the number of active oilrigs in the USA fell to the fewest since November 2010.
The Euro meanwhile came under pressure from weaker-than-forecast German Producer Price Inflation, Greek Current Account and Eurozone Construction Output data.
The Euro could make further losses against the ‘Loonie’ as BoC governor Poloz is due to deliver a speech later in the day.