The EUR/CAD pair rebounded from a dip to the 1.5755-1.5750 region during the Asian session, rising to a fresh daily high in the last hour. However, the rally lacked significant follow-through, and the pair is currently trading in a narrow range around 1.5780-1.5785, showing little change on the day.
The Canadian Dollar (CAD) received a brief boost after reports indicated that Prime Minister Mark Carney’s Liberal Party won Canada’s federal election, securing a historic fourth term. However, the market’s initial reaction quickly faded, as Carney is set to form a minority government. This, coupled with bearish sentiment around Crude Oil prices, has undermined the commodity-linked Loonie, allowing EUR/CAD to attract some dip-buyers.
The ongoing US-China trade tensions remain a dominant factor in market sentiment, with mixed signals surrounding the negotiations. Investors continue to worry that the prolonged conflict between the two largest economies could lead to a global recession and hurt fuel demand. Adding to concerns, several OPEC+ members have reportedly suggested accelerating oil output hikes in June, pushing Crude prices to a two-week low.
Meanwhile, the Euro faces pressure from a slightly stronger US Dollar (USD) and the European Central Bank’s (ECB) dovish outlook. The ECB’s decision to lower interest rates for the seventh time this year and its warnings about economic growth being hit by US tariffs support the likelihood of further policy easing, keeping EUR bulls on the defensive.
Traders are now looking ahead to the German GfK Consumer Climate Index and Spanish Flash CPI for potential short-term drivers, as well as the upcoming German, French, and Italian CPI figures on Wednesday. Additionally, the preliminary Eurozone GDP report will be crucial in influencing the shared currency and could lead to more significant trading opportunities for EUR/CAD.
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