The EUR/CAD currency pair settled below recent high of 1.5931, its strongest level since July 31st 2020, in the wake of the European Central Bank’s and the Bank of Canada’s policy decisions.
The Euro lost ground after the ECB lowered all three of its benchmark interest rates by 25 basis points:
– the main refinancing operations rate to 2.40%;
– the deposit facility rate to 2.25%;
– the marginal lending rate to 2.65%.
The policy decision reflected higher confidence that inflation was on track to return sustainably to the ECB’s 2% target.
However, the ECB pointed out that the deteriorating outlook for the bloc’s economic growth remained a primary concern.
During the post-meeting press conference, ECB President Christine Lagarde said that the decision to lower rates was agreed upon by all Governing Council members. Lagarde acknowledged the “exceptional uncertainty” clouding the economic outlook, citing new trade barriers facing Euro Area exporters, disruptions of international commerce, financial market tensions and geopolitical uncertainty as significant headwinds.
Meanwhile, the Bank of Canada kept its benchmark interest rate without change at 2.75% at its April 16th policy meeting, in line with market consensus.
That followed 225 basis points of rate cuts since the beginning of the monetary easing cycle in June 2024.
BoC policy makers noted that the unpredictability on the magnitude of tariffs heightened downside risks on growth and raised inflation expectations.
In case the US limits the scope of its tariffs on Canada, the BoC projects growth to temporarily slow and inflation to stay in proximity to the 2% target.
And, in case the US proceeds with an all-out trade war with Canada and China, the central bank projects a recession this year and inflation near 3%.
The BoC’s cautious stance has cemented expectations of a stable monetary framework in Canada.
The EUR/CAD currency pair settled 0.31% higher at 1.5760 on Friday.
The minor Forex pair gained 0.18% for the week.
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