Bank of America (BofA) has changed its stance to be bullish on the Euro versus the Canadian Dollar () this week. Analysis of the bank’s position indicates the expectation of a continuation of the upward spot trend. Additionally, BofA’s Cross-Asset Risk System (CARS) model supports a bullish outlook for EURCAD based on positive signals from interest rates and commodities.
The market is currently debating whether the Bank of Canada (BoC) will begin its rate cutting cycle in June or July. The upcoming release of the Canadian Consumer Price Index (CPI), if it meets consensus expectations, could mark the first time since 2021 that both the median and the trimmed core CPI numbers fall below 3%.
Consumer price index targets could increase the likelihood of a Bank of Canada rate cut in June. BofA suggests that this outcome could lead to a rise in the EURCAD exchange rate as expectations for Bank of Canada rate cuts move closer to those of the European Central Bank (ECB).
The bank’s analysis suggests Canadian CPI data due out this week plays a critical role in the EURCAD’s potential move. If the CPI comes in higher than expected, it could jeopardize BofA’s bullish outlook for the currency pair.
The bank’s outlook hinges on the assumption that the consensus CPI could potentially lead to an earlier start to the Bank of Canada’s rate cut cycle. This development is expected, in turn, to strengthen the euro against the Canadian dollar in the short term.
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