The EUR/CAD currency pair fell to around 1.6275 during the early European trading session on Monday. This drop coincided with growing anticipation for the Canadian Consumer Price Index (CPI) inflation data for October, which was due to be released later that day. Market expectations indicate less than a 50% chance of another interest rate cut by July 2026 and only a 4% chance for the December 2025 meeting. European Central Bank (ECB) officials, including Olli Rehn and Mārtiņš Kazāks, have suggested that interest rates might stay the same given the current economic conditions. Rehn cautioned that the potential for slowing inflation deserves attention, although risks remain. Kazāks noted that any necessary rate changes would come after significant shifts in the economy.

Canadian Dollar and Oil Prices

The reopening of Russia’s Novorossiysk port after a brief closure due to a strike in Ukraine relieved worries about oil supply disruptions. This news impacted the Canadian Dollar (CAD), as Canada’s economy heavily relies on oil prices. When crude oil prices drop, as they did with the resumption of operations at the Russian port, the value of the CAD tends to fall, reflecting Canada’s status as a major oil exporter. With the EUR/CAD cross around 1.6275, today’s Canadian inflation data takes center stage. The release of October’s CPI is crucial for determining the pair’s direction this week. Given that Canada’s CPI for September was 2.9%, any figure exceeding the market’s expectation of 2.7% could trigger major movement. If inflation comes in higher than expected, it may compel the Bank of Canada to keep its strict policy, which could strengthen the CAD. We observed a similar pattern earlier in 2025 when strong economic data delayed any discussions on rate cuts. Such a scenario might push EUR/CAD lower, likely testing support levels below 1.6200. However, the CAD may struggle due to falling oil prices, which are a key export for Canada. The reopening of the Russian port has eased supply concerns, pushing WTI crude prices down to about $78 a barrel from over $85 just two months ago. This decline in the energy market limits the CAD’s strength, regardless of inflation data.

Euro’s Stability Amid ECB Policy

On the other side, the European Central Bank (ECB) is creating a strong support system for the Euro. ECB officials have indicated they are not in a hurry to change interest rates, with markets pricing in only a 4% chance of a rate cut in December 2025. This stability from the ECB suggests that any drops in the EUR/CAD cross may be temporary. With these mixed signals, we should expect increased volatility in the upcoming weeks. The pair’s advance toward 1.6300 has paused, but underlying support for the Euro remains solid, creating a delicate balance. Options traders might consider strategies like straddles to profit from significant price swings in either direction instead of betting on a specific trend. Looking forward, it’s essential to watch upcoming Eurozone flash inflation figures and Canada’s next employment report. These data points will be critical in determining whether the Bank of Canada or the European Central Bank will first signal any policy changes. For now, the trading environment favors those prepared for abrupt and unpredictable movements. Create your live VT Markets account and start trading now.

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