EUR/CAD insights: Understanding the factors that impact its value

EUR/CAD is a popular currency pair to trade in the forex market. It represents the exchange rate between the euro (EUR) and the Canadian dollar (CAD). It attracts a significant trading volume from traders and investors hoping to capitalise from changes in the currency pair’s exchange rate.

More about the EUR/CAD currency pair

EUR/CAD is a popular currency pair because it consists of two major currencies. As of February 22, the euro is the world’s second most traded currency, whereas the Canadian dollar is the sixth most traded. The euro, introduced on 1 January 1999, is currently the official currency of 20 out of 27 Eurozone countries. It is also the second-largest reserve currency.

The European Central Bank (ECB) and the Eurosystem manage and administer the currency. The Eurosystem includes the central banks of the Eurozone countries. Some of the largest economies include Germany, France, Italy, Spain, and the Netherlands.

The Canadian dollar (CAD) is the official currency of Canada’s 10 provinces and 3 territories. The CAD is commonly referred to as the ‘Loonie’ because of an image of a common loon on the back of its notes. The CAD is a commodity currency, so its value is closely tied to the price of key commodities that Canada exports.

Experts consider the euro a modern currency. In contrast, the ‘Loonie’ dates back to the 17th century, when French colonists introduced coins to the region. There are no currencies pegged to the CAD, and the CAD floats freely in the market. The currency is administered and managed by the Bank of Canada.

What affects the price of EUR/CAD?

There are many factors that can influence the exchange rate of EUR/CAD, including political events such as elections, geopolitical instability, and monetary decisions in both the Eurozone and the Canadian economy. However, interest rates play a major role in the fluctuations of the EUR/CAD exchange rate and are influenced by the following:

Economic factors

• Interest rate differentials between the European Central Bank (ECB) and the Bank of Canada (BoC).
• GDP growth rates – stronger economic growth in either of the regions can support its currency
• Inflation levels – rising inflation can weaken a currency, especially if central banks reduce interest rates.
• Employment data – higher employment levels indicate a stable economy.
• Trade balances – the trade relationship between the Eurozone and Canada can affect demand for each currency.

Commodity prices

Canada is a major global producer and exporter of commodities such as crude oil, métaux , wheat, and aluminium. Data on the global prices of these commodities may also have an impact on the value of the CAD.

Correlation with other major pairs

Traders often correlate the EUR/CAD exchange rate with other currency pairs. For example, it may show a positive correlation with the EUR/USD currency pair or a negative correlation with USD/CAD due to related factors that impact these currency pairs.

Trading EUR/CAD: Important financial announcements

When trading EUR/CAD, it’s important to observe some key financial announcements:

• Monetary policy announcements of the European Central Bank (ECB), such as interest rate increases
• Monetary policy announcements of the Bank of Canada (BoC)
• Eurozone and Canada Consumer Price Index (CPI) growth
• Trade balances of the Eurozone and Canada
• Announcements from OPEC (Organisation of the Petroleum Exporting Countries) could impact oil prices and CAD
• GDP growth in Canada and the Eurozone
• Euro Employment Change and Canada Employment Rate

EUR/CAD holds above 1.56 amid German fiscal boost

EUR/CAD remained supported above 1.56 on Monday (17 March) prior to Germany’s upcoming vote on a proposed fiscal spending package and Canada’s CPI inflation report.

The euro has recently gained support from a consensus between key political figures in Germany regarding considerable increases in state borrowing. German Chancellor Friedrich Merz has reached an agreement with the Greens in new spending for defence and infrastructure.

Merz has developed a plan for a €500 billion financial package aimed at boosting infrastructure and defence spending. The goal is to stimulate economic expansion and boost military spending in Germany. Germany is expected to vote on the debt bill on Tuesday (18 March).

The EUR/CAD currency pair was up 0.12%, trading at 1.5646. The previous week, the minor forex pair reached a high of 1.5856, its highest level since 31 July 2020.

EUR/CAD continues to edge higher

EUR/CAD continued to edge higher on 18 March after two days of gains, trading near 1.5640 during European hours. On the daily chart, analyse technique indicates the weakening of a bullish bias, with the currency cross positioning below the ascending channel pattern.

The 14-day Relative Strength Index (RSI), a key indicator of overbought or oversold conditions, has moved back to 70, indicating a slight cooling-off while staying in the overbought zone. This implies traders may be taking profits, potentially slowing price movement.

On the upside, EUR/CAD may encounter resistance as it tries to re-enter the ascending channel near its lower boundary around 1.5780. Beyond that, the 1.5857 mark, its highest level since July 2020 reached on 11 March, is the next key hurdle is the 1.5857 mark. A successful channel return would boost the bullish outlook and could push the currency cross in the direction of the channel’s upper boundary, which is around 1.6250.

EUR/CAD: March 2025 forecast

Analysts expect the price of EUR/CAD to rise in March, with a predicted change of -0.43% from current rates. The forex pair may average about $1.556031, reaching a high of $1.572337 and a low of $1.547253. This forecast follows a [STRONG/POOR] market performance over the previous 30 days, when EUR/CAD increased by 4.98%, suggesting that the trend may continue. A potential ROI of 0.62% suggests a profitable opportunity for long traders.

EUR/CAD: 2025 forecast

According to forecasts for 2025, the EUR/CAD currency pair is expected to rise significantly, with prices possibly reaching $1.825588 in September. Prices are expected to fluctuate from $1.547253 to $1.825588. Investors may expect a potential 16.82% return on investment, aligning with a bullish outlook for 2025.

Disclaimer: This information is not considered investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced, or hyperlinked, in this communication.