TD Securities’ FX strategists expect the euro to stay relatively firm on currency crosses, mainly against the pound and the Canadian dollar. They link this to UK political uncertainty after recent elections and differing paths for central banks.
They see the euro as better placed than sterling if political developments in the UK add pressure to the pound. They also say the euro could outperform the Canadian dollar if geopolitical conditions stay in a stalemate and policy differences persist.
Central Bank Divergence And Euro Strength
They forecast at least one European Central Bank rate rise in 2026. They expect the Bank of Canada to stay on hold for the rest of this year.
Their baseline assumes oil prices settle near $90 per barrel. They also note the euro may face a higher hurdle to extend gains from current levels, even though it has held up despite reliance on oil imports.
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Given the divergence between central banks, we see the Euro as having relative strength against the British Pound and the Canadian Dollar. The political landscape in the UK and differing monetary policies create clear opportunities in the cross-currency markets. These factors suggest positioning for a stronger Euro in the weeks ahead.
Trade Setup For Eur Crosses
The noise from UK politics, which has lingered since the 2024 general election, is starting to weigh on the pound. We have seen one-month implied volatility on GBP pairs tick up to nearly 11% recently, reflecting market nervousness over the government’s narrow majority and fiscal plans. This backdrop makes long EUR/GBP positions attractive.
We also see the Euro faring better than the Canadian Dollar due to the gap in central bank policy. The latest flash estimate for April 2026 showed Eurozone inflation holding stubbornly at 2.8%, making a rate hike from the European Central Bank likely by autumn. This contrasts sharply with the Bank of Canada, which is expected to hold steady.
Despite Brent crude prices holding firm around $92 per barrel, the Canadian economy is showing signs of weakness, with first-quarter GDP for 2026 coming in at a lackluster 0.5% annualized growth. This soft domestic data gives the Bank of Canada a reason to stay on the sidelines. The widening policy differential should provide a tailwind for EUR/CAD.
For derivative traders, this outlook supports buying call options on EUR/GBP and EUR/CAD with expirations in the next one to three months. This strategy allows for participation in the expected upward move of the Euro on these crosses. It also clearly defines the risk involved in the trade.
