The EUR/CAD cross saw slight gains during the Asian session, yet remained within the previous day’s trading range at the 1.6345-1.6350 level. Traders await Canadian CPI data for clearer market movements, while the Canadian Dollar remains weakened due to expectations of a Bank of Canada (BoC) rate cut.
Oil prices and BoC’s recent surveys further add pressure on the Loonie, supporting the EUR/CAD pair. The recent downgrade of France’s credit rating to A+ by S&P Global Ratings impacts the Euro, limiting its gains against the Canadian Dollar.
Christine Lagarde’s Upcoming Speech
Christine Lagarde, the ECB President, is scheduled to speak at a conference but is not expected to address monetary policy. Despite pressure on the Euro from a stronger US Dollar, decreasing expectations of further ECB interest rate cuts may bolster the EUR/CAD cross.
The Canadian Dollar showed strength against the New Zealand Dollar today. A corresponding heat map highlights the percentage changes of major currencies against each other. The map allows comparison by selecting a base currency from the left column and a quote currency from the top row, highlighting the percentage change accordingly.
We are watching the EUR/CAD cross closely around the 1.6350 level as the market anticipates today’s Canadian inflation figures. A weaker inflation print, with forecasts suggesting a drop to 2.3% from last month’s 2.5%, would almost certainly seal the deal for a Bank of Canada rate cut next week. This expectation is keeping the Canadian dollar under pressure.
Bank of Canada Economic Outlook
The Bank of Canada’s recent surveys have already pointed towards economic softening, reinforcing our view that a rate cut is coming at the October 29th meeting. This dovish stance is amplified by weakness in crude oil prices, with WTI struggling around $72 a barrel due to higher OPEC+ output. A weak loonie seems to be the path of least resistance for now.
On the other side, the Euro is facing its own headwinds from the recent S&P downgrade of France’s credit rating, which is limiting the upside. However, the European Central Bank appears to be on hold after cutting rates earlier in 2025, as inflation remains stubbornly above their target. This policy divergence between a cutting BoC and a holding ECB is the main driver supporting this pair.
Given this outlook, we see an opportunity in options to play a potential rise in EUR/CAD following the CPI data. Buying call options with a mid-November expiry allows us to capitalize on a post-CPI and post-BoC meeting rally. A strike price around 1.6400 could offer good value if the pair breaks higher as we anticipate.
