Canadian Dollar struggles against Euro as inflation accelerates to 3%
EUR/CAD edges higher on Monday, trading around 1.6070 at the time of writing, up 0.11% on the day. The pair maintains a positive bias despite a stronger-than-expected acceleration in Canadian inflation, which provides some support to the Canadian Dollar (CAD).
The Canadian Dollar faced resistance against the Euro on Monday as inflation in Canada surged to a 3% year-over-year rate in July, surpassing market forecasts. Despite this unexpected inflation acceleration, the Canadian Dollar struggled to outperform the Euro due to traders' expectations of further interest rate hikes from the European Central Bank (ECB).
The Bank of Canada's core inflation measure and other preferred inflation indicators indicated a modest uptick in price pressures. Higher fuel and travel expenses in July, coupled with slower growth in food prices, contributed to the inflation surge. Market analysts noted that while the Canadian Dollar showed strength against the US Dollar, it failed to gain a significant advantage over the Euro due to the latter's prospects of tighter monetary policy.
Forex experts highlighted that geopolitical developments could influence the ECB's rate-hike trajectory, with a potential peace in the Middle East reducing the pressure for additional hikes.
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- Canadian Dollar: Inflation steady near target – RBC fxstreet.com
