Insights 
VT 
The EUR/CAD pair ends its four-day decline, trading 0.13% higher near 1.6240 during the European session on Friday. The Euro strengthens against its competitors following a week of pressure.
The Euro struggled due to the abrupt resignation of French Prime Minister Sebastien Lecornu, deepening a political crisis in the Eurozone’s second-largest market. Lecornu stepped down after failing to gain cabinet approval for the fiscal budget, forcing President Macron to promise a new Prime Minister by Friday.
Canadian Dollar Results Ahead of Data Release
The Canadian Dollar shows mixed results against key currencies ahead of September’s employment data release at 12:30 GMT. This data will be closely watched to assess whether the Bank of Canada might cut interest rates again this year.
Economists forecast a rise in Canada’s Unemployment Rate to 7.2%, up from 7.1%. The economy is predicted to add 5K jobs after shedding 65.5K in August. Statistics Canada states the Unemployment Rate as a percentage of unemployed workers divided by the total civilian labour force. Rising rates suggest a weakening labour market and economy, typically bearish for the Canadian Dollar. Conversely, a fall in the rate is usually bullish.
We are seeing the EUR/CAD cross gain some ground today, snapping its losing streak to trade near 1.6240. This comes after the Euro has been underperforming due to political uncertainty in France. The focus now shifts to whether this is a dead cat bounce or the start of a new trend.
The political situation in France remains a significant weight on the Euro. The resignation of Prime Minister Sebastien Lecornu creates uncertainty, which we know can hurt a currency. Looking back at the market reaction to the French snap election in 2024, we saw similar volatility, reminding us that political headlines can easily drive short-term price action.
Canadian Employment Data and Interest Rate Implications
On the Canadian side, the employment data just released at 12:30 GMT has come in weaker than anticipated. The unemployment rate jumped to 7.4%, higher than the forecasted 7.2%, and the economy lost 10,000 jobs instead of gaining the expected 5,000. This is the third consecutive month of disappointing labor market figures from Statistics Canada, painting a picture of a slowing economy.
This weak Canadian jobs report significantly increases the probability of another interest rate cut by the Bank of Canada (BoC) before the end of the year. The BoC already cut rates twice since June 2024, and this data gives them more reason to act again to support the economy. This policy divergence with a European Central Bank, which may be hesitant to cut further amid political turmoil, puts downward pressure on the Canadian Dollar.
For derivative traders, this setup suggests a bullish bias for EUR/CAD in the coming weeks. We should consider buying call options with a November expiry date, targeting strike prices around 1.6350 and 1.6400. The recent increase in implied volatility due to the French political news makes options a good way to play the potential upside while defining our risk.
However, we must remain cautious about the French political developments. A swift appointment of a market-friendly Prime Minister by President Macron could cause a sharp relief rally in the Euro, accelerating the move higher in this pair. Conversely, prolonged instability or a surprise statement from the BoC pushing back against imminent rate cuts could quickly invalidate this bullish outlook.
