Can the euro withstand pressure on EUR/CAD from rising oil prices?

EUR/CAD comes under pressure as higher crude oil prices lend support to the Canadian Dollar.
Further upside in global oil prices remains limited by geopolitical developments and continuing US-Iran negotiations.
October HICP figures from the Eurozone are in focus as traders assess the European Central Bank’s monetary policy outlook.

Pressure on EUR/CAD has returned as rising crude oil prices provide strong support to the Canadian Dollar (CAD). Following the previous day’s advance, the cross trades near 1.5620 in Tuesday’s European session. Canada is the largest crude oil supplier to the United States, leaving both its economy and its currency closely linked to developments in global energy markets.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Geopolitical developments nevertheless continue to limit the scope for oil prices to rise. Iran has confirmed that indirect talks with the United States to resolve their eight-month conflict remain in progress, potentially creating further pressure on crude prices. The discussions come after several days of negotiations involving Iranian officials and Qatari mediators. Those negotiations produced revised proposals but no breakthrough.

Wednesday’s release of preliminary October Harmonized Index of Consumer Prices (HICP) figures for the Eurozone is now on traders’ radar. Expectations for the European Central Bank’s (ECB) forthcoming monetary policy decisions are likely to be significantly shaped by the data.

A modest pick-up in annual headline HICP growth to 3.9% is the market forecast, compared with September’s 3.8%. By contrast, the core measure is expected to remain unchanged at 2.5% year-on-year. Core HICP strips out volatile items including food, energy, alcohol and tobacco.

Can the Euro shed its risk premium while French spreads remain elevated?

With French government bond spreads still elevated, ING analysts note that they “didn’t benefit from lower oil prices yesterday,” and suggest that “levels above 150bp are the new normal now.” In this environment, their assessment is that “it therefore remains hard for the Euro to shake out the lingering risk premium,” while the energy situation needs “much more tangible progress” “for oil to trade sustainably lower from here.”

How Is The Euro Performing Today?

The Euro’s weakest performance today was against the Canadian Dollar. The table below sets out today’s percentage changes in the Euro (EUR) against the major currencies listed.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.04%	-0.04%	0.11%	-0.19%	0.38%	0.04%	-0.08%
EUR	-0.04%		-0.08%	0.05%	-0.22%	0.35%	-0.02%	-0.13%
GBP	0.04%	0.08%		0.13%	-0.15%	0.41%	0.05%	-0.05%
JPY	-0.11%	-0.05%	-0.13%		-0.30%	0.27%	-0.09%	-0.19%
CAD	0.19%	0.22%	0.15%	0.30%		0.57%	0.20%	0.10%
AUD	-0.38%	-0.35%	-0.41%	-0.27%	-0.57%		-0.35%	-0.46%
NZD	-0.04%	0.02%	-0.05%	0.09%	-0.20%	0.35%		-0.10%
CHF	0.08%	0.13%	0.05%	0.19%	-0.10%	0.46%	0.10%

To read the heat map of percentage movements between major currencies, select the base currency in the left-hand column and the quote currency in the top row. For instance, choosing the Euro on the left and following that row across to the US Dollar gives the percentage change for EUR (base)/USD (quote) in the corresponding cell.