EUR/CAD Exchange Rate Declines Amid Rising Oil Prices and ECB Hike Expectations
The EUR/CAD exchange rate has continued its downward trend for the second consecutive day, trading around 1.6040 during European hours on Tuesday. The decline of the Euro against the Canadian Dollar is largely attributed to the strength of the commodity-linked CAD, which benefits from rising crude oil prices.
Oil markets have strengthened as traders respond to heightened uncertainty surrounding global supply, particularly following drone attacks in Saudi Arabia and the ongoing shutdown of its East-West pipeline with no clear timeline for resumption. This has led to a surge in oil prices.
The Canadian inflation rate remained steady at 3% year-over-year in August, unchanged from July. Economists at Royal Bank of Canada (RBC) point out that core measures are close to the Bank of Canada's 2% target, reinforcing their view that policy is likely to remain unchanged for an extended period.
However, potential upside strength in the Euro could limit downside pressure on the EUR/CAD cross. European Central Bank officials have warned about persistent inflation risks, driving expectations for further monetary tightening. Major banks, including Goldman Sachs and Citi, now expect another ECB rate increase in December, with markets heavily backing this scenario.