The EUR/CAD pair has stopped its four-day decline, rising by 0.13% to about 1.6240 during the European session on Friday. The Euro is gaining strength against other currencies after facing challenges last week. The Euro faced difficulties due to the sudden resignation of French Prime Minister Sebastien Lecornu, adding to the political crisis in France, the Eurozone’s second-largest market. Lecornu left office after not getting cabinet approval for the fiscal budget. President Macron has promised to appoint a new Prime Minister by Friday.

Canadian Dollar Performance Before Data Release

The Canadian Dollar is showing mixed results against major currencies as we await the release of employment data for September at 12:30 GMT. This data is crucial for understanding whether the Bank of Canada might reduce interest rates again this year. Economists predict that Canada’s Unemployment Rate will rise to 7.2%, up from 7.1%. They expect the economy to add 5,000 jobs after losing 65,500 in August. Statistics Canada reports the Unemployment Rate as the share of unemployed workers among the total civilian labor force. A rising rate usually indicates a weakening job market and economy, which is generally negative for the Canadian Dollar, while a falling rate tends to boost it. Today, we see the EUR/CAD pair gaining some ground, trading near 1.6240. This gains momentum after the Euro’s struggles due to political uncertainty in France. The big question now is whether this is just a temporary bounce or the start of a new trend. The political situation in France continues to weigh heavily on the Euro. The resignation of Prime Minister Lecornu creates uncertainty, which can negatively impact a currency. Looking back at reactions to the French snap election in 2024, we saw similar volatility, reminding us that political news can spur quick price changes.

Canadian Employment Data and Interest Rate Impact

In Canada, the employment data released at 12:30 GMT came in weaker than expected. The unemployment rate rose to 7.4%, higher than the 7.2% forecast. The economy lost 10,000 jobs instead of gaining the predicted 5,000. This marks the third month in a row of disappointing labor market results from Statistics Canada, suggesting a slowing economy. This weak jobs report increases the chances of another interest rate cut by the Bank of Canada (BoC) before the year ends. The BoC has already lowered rates twice since June 2024, and this data gives them more reason to consider further cuts to support the economy. In contrast, the European Central Bank may be reluctant to cut rates further due to ongoing political issues, putting additional downward pressure on the Canadian Dollar. For derivative traders, this scenario indicates a bullish outlook for EUR/CAD in the coming weeks. It might be wise to buy call options with a November expiry date, targeting strike prices around 1.6350 and 1.6400. The recent rise in implied volatility from the French political events makes options a good strategy to benefit from potential upside while managing risk. However, we should stay alert to developments in French politics. A quick announcement of a market-friendly Prime Minister by President Macron could lead to a sharp rally in the Euro, pushing the EUR/CAD pair higher. On the other hand, ongoing instability or unexpected statements from the BoC against immediate rate cuts could quickly reverse this positive outlook. Create your live VT Markets account and start trading now.

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