Euro holds steady against Canadian Dollar after Germany’s IFO business figures

• With the German IFO Institute Business Climate Index rising to 90.2 in October, EUR/CAD holds steady.
• Markets drew relief from Moody's unexpected decision to retain France's Aa3 rating with a negative outlook, Deutsche Bank notes.
• Lower crude oil prices weighed on the Canadian Dollar after President Trump ruled out immediate military action against Iran.

Germany’s IFO business figures prompt little movement in EUR/CAD. Having opened with a gap higher, the cross eases back but remains in positive territory, trading around 1.5710 during Monday’s European session.

 At 90.2 in October, the German IFO Institute Business Climate Index is up from September’s 89.9 and above the market forecast of 89.8. By contrast, the IFO Current Assessment Index slips from 89.5 to 88.8. The Expectations Index rises from 90.4 to 91.6, providing an early indication of current conditions and business expectations over the next six months.

France secures reprieve as Moody’s retains Aa3 rating

A decision by Moody’s gave France some respite at the end of last week, according to Deutsche Bank analysts, who note that the sovereign “got a boost on Friday night as Moody’s defied market expectations and maintained their Aa3 rating (negative outlook).” Following recent volatility in French assets, the analysts suggest that the decision helped calm markets. Investors nevertheless remain alert to the possibility of future action given the negative outlook.

Weaker oil prices continue to weigh on the commodity-linked Canadian Dollar (CAD), allowing EUR/CAD to retain its gains. The decline in crude followed US President Donald Trump’s decision to rule out immediate military action against Iran. According to Al Jazeera, he stated, “there will not be a strike today,” having previously suggested that Washington might need to “finish the job” or potentially agree a deal with Tehran as Iranian and Houthi threats against American interests in the region intensified.

Rabobank expects BoC to leave rates unchanged in October

An unchanged policy stance remains Rabobank’s expectation for the BoC, despite market pressure for further tightening. Its strategists write that they “expect the Bank of Canada to hold the overnight policy rate at 2.25% at the October 28 meeting,” reinforcing their view that the central bank will maintain its current setting.