The European Central Bank announces its latest interest rate decision tonight, and the EURCAD has hit some price resistance.
EURCAD – Daily Chart
EURCAD has been climbing since February as investors look to capitalize on the potential for a eurozone economic recovery. The 1.4764 level was resistance in December and has capped the price ahead of the data. That will determine a continuation or correction.
The ECB decision comes at 9:15 pm HKT, but traders can see the reaction to the data and capitalize on a higher breakout or a lower breakdown. Canadian trade emerged after that decision and just before the critical ECB press conference.
Canada’s trade figures are expected to show a C$0.1BN month after a disappointing deficit last month of C$-0.31BN.
The big event will be the ECB’s press conference, and President Christine Lagarde can update markets on their idea of a summer rate cut from the central bank. The euro economy has shown some signs of improvement, and that has boosted the euro.
The ECB may also be asked about its largest loss in two decades, which was announced recently.
The European Central Bank posted another large financial loss in 2023, burning through the last of its provisions. It said more losses are forthcoming, with higher rates pushing up interest payments to banks.
While the bank said it can operate “regardless of any losses,” the accounts have broader implications for its reputation and independence from state money.
The ECB printed trillions of euros over the last decade despite warnings from conservative economists. The losses could amplify those critics and get louder if central banks ask for additional capital from their governments, which could be seen as a public bailout.
The ECB meeting comes this week after the Bank of Canada kept its benchmark interest rate on hold at 5%. The BoC hiked rates by 475 basis points to a 22-year high between March 2022 and July 2023 but has held them there as it attempts to cool inflation while avoiding pushing the country into a recession.
The euro could show volatility if the ECB President adjusts the markets’ expectation of a June rate cut. A “higher for longer” quote would send the euro reeling from the resistance level.
