German and Canadian data will test the EURCAD exchange rate on Wednesday.
EURCAD – Daily Chart
EURCAD has moved above the 1.4927 level, but the coming data could decide whether the price will fail here or continue to rise to 1.50428.
The EUR vs. CAD rate has been rallying since late June as oil prices have corrected. Weakness in the Canadian economy has also helped the euro.
The GfK consumer confidence data from Germany will be brought to HKT at 2:00 pm on Wednesday. Another release at 3:30 pm is the HCOB manufacturing data release.
Analysts expect a slowdown in consumer confidence from -21.8 to -21 despite the recent interest rate cut. European consumer confidence on Tuesday was also slightly lower, dropping from 14.0 to 13.0. On Tuesday, Spanish European Central Bank official Luis de Guindos said that inflation data “was practically in line with our projections.”
“Data-wise, September is a much more convenient month for taking decisions than July was. The current level of uncertainty is huge, so we have to be prudent when making decisions,” he added.
De Guindos said the ECB will examine wage growth closely. However, there is also uncertainty over Ursula Von der Leyen’s reelection and the French elections.
The German data will be followed by a Bank of Canada interest rate decision later in the evening. Markets expect another 25 basis point cut to 4.5% from 4.75%.
“Canada is just kind of following the drift down in the commodity complex,” said Michael Goshko, senior analyst at Convera Canada. “It’s all the commodity currencies that are getting beaten up.”
Canada is a major producer of commodities, including oil, which is now trading at a six-week low on concerns about demand in China.
“There is some event risk tomorrow with the Bank of Canada and just how dovish they want to be,” Goshko said.
A 25 bps cut could strengthen the Canadian dollar, and weaker German data would also help halt the recent rally.
