The EUR/CAD currency pair bounced off a 1-month low of 1.5939 on Wednesday ahead of the outcome of the European Central Bank’s and the Bank of Canada’s policy meetings.
The European Central Bank is largely expected to keep its main refinancing operations rate intact at 2.15% at its April 30th meeting.
And, the ECB deposit facility rate is expected to be kept at 2.00%.
The ECB’s March decision to hold rates was framed against a backdrop of uncertainty around inflation and growth linked to joint military operations by the United States and Israel against Iran.
ECB President Christine Lagarde had cautioned that the “increase in energy prices will drive inflation above 2% in the near term.”
A report by Reuters had suggested that the ECB might consider discussing an increase in key borrowing costs in April and could move to raise rates in June if elevated energy prices persist.
Meanwhile, the Bank of Canada is expected to keep its benchmark interest rate intact at 2.25% at its April 29th policy meeting.
In March, BoC policy makers acknowledged increasing downside risks to growth, while warning that inflation risks are rising, largely driven by elevated energy prices.
The key takeaway from the March decision was the removal of prior guidance suggesting that the current policy stance was appropriate. This change signaled that the central bank was now open to further tightening if inflation pressures persist.
BoC officials indicated they might look through the immediate inflation impact of geopolitical developments, but emphasized that sustained high energy prices would not be allowed to feed into broader and more persistent inflation.
The EUR/CAD currency pair was last down 0.04% on the day to trade at 1.6015.
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