Euro drops against Canadian Dollar ahead of ECB policy decision

EUR/CAD continues its losing streak that began on October 16, trading around 1.5580 during European hours on Thursday. The currency cross depreciated as the Euro (EUR) lost ground ahead of the European Central Bank’s (ECB) upcoming policy decision.

The ECB is widely expected to hold its deposit rate unchanged at 2.50% at its Thursday meeting, following 50 basis points of rate increases earlier in the year. However, persistent energy-driven inflation has fueled ongoing debate over whether policymakers might resume rate hikes in December. As a result, market participants are closely scrutinizing the ECB’s evaluation of inflation risks, economic growth, and any forward guidance regarding the future path of interest rates.

Adding to the downward pressure on the EUR/CAD cross, the Canadian Dollar (CAD) strengthened after the Bank of Canada (BoC) delivered a 25 basis point rate hike, raising its benchmark overnight interest rate to 2.50% at its October meeting on Wednesday. BoC Governor Tiff Macklem indicated that further rate hikes may be needed, though policymakers intend to move cautiously given economic uncertainties. Supporting its hawkish stance, the BoC noted in its official statement that ongoing global economic resilience prompted a slight upward revision to 2026 global GDP growth to 3.1%, while maintaining its projections for 2027 and 2028 at 3.2%.

Analysts at Danske Bank highlight the limited market reaction to the Bank of Canada’s latest rate increase, noting that “USD/CAD and the 2Y swap rate were about unchanged on the news,” underscoring how the policy shift failed to materially move key Canadian FX and rates benchmarks.