Euro remains stronger against Canadian Dollar following Eurozone HICP inflation data

EUR/CAD appreciates after posting modest losses in the previous day, trading around 1.6050 during the European hours on Thursday. The currency cross holds its ground, driven by a stronger Euro (EUR) following the release of the Eurozone Harmonized Index of Consumer Prices (HICP) data for August.

As expected, the monthly HICP rose 0.4% MoM, matching the previous period's increase. Annual inflation eased slightly to 3.2% compared to the expected 3.3% reading. Meanwhile, core monthly HICP held steady at a 0.2% gain, and the annual core reading met expectations at 2.4%, demonstrating consistent underlying price trends across the region.

Simultaneously, the EUR/CAD cross is gaining ground due to weakness in the commodity-linked Canadian Dollar (CAD), which has been dragged down by falling crude oil prices. Oil markets cooled following reports that Saudi Arabia expects to restore about half the capacity of its damaged East-West pipeline within days, with full operations targeted within six weeks. The pipeline serves as a critical bypass route around the vulnerable Strait of Hormuz following recent drone strikes on the infrastructure.

BoC seen edging toward late-year normalization as inflation concerns build

Strategists at Scotiabank highlight that the BoC’s stance remains notably supportive, stressing that “the Bank’s policy settings remain accommodative and concern about price pressures suggests a growing risk that the process of normalization may start late this year,” in line with Scotia’s long-held rate forecast.