EUR/CAD snapped a three-day slide to trade near 1.5930 in European hours on Thursday, though the euro faced fresh headwinds from concerns over French public finances. Citi said rising fiscal risks in France could lead the European Central Bank to pause interest rate increases after December, or earlier if financial stress spreads through the euro area.
ECB Rate Outlook and Eurozone Inflation
A Reuters poll showed markets expect the ECB to keep its deposit rate at 2.50% in October and then raise it by 25 basis points in December, with inflation running close to double the 2% target. Lagarde said energy-driven inflation has yet to feed into the broader economy, a comment consistent with a more restrained policy path.
Canadian Dollar Pressured by Oil and Monetary Policy
On the Canadian side, the loonie was pressured by weaker oil after Washington weighed easing sanctions on “shadow fleet” vessels carrying crude and petroleum products from Russia, Iran and Venezuela, with the aim of lowering record-high global freight rates. TD Securities added that Canada’s jobs report drove a rally in CAD rates, leaving October no longer priced for a hike and pushing 2s back below 3.20%, as expectations for BoC tightening were scaled back.
