EUR/CAD remains vulnerable near 1.4750 despite higher Eurozone Q3 Negotiated Wages Rate

EUR/CAD seesaws near the intraday low of 1.4750 even though the Eurozone Negotiated Wages Rate accelerated in the third quarter.
ECB officials worry about the impact of a trade war with the US on economic growth.
Canada’s hotter-than-expected inflation data strengthens the Canadian Dollar.

Sagar Dua FXStreet

The EUR/CAD pair stays under pressure near the intraday low of 1.4750 in the European trading session on Wednesday even though Eurozone Negotiated Wages Rate data accelerated in the third quarter of the year. The wage growth measure grew by 5.42%, faster than the Q2 release of 3.54%, prompting expectations of a recovery in consumer spending.

However, the cross showed a muted reaction to the wage growth measure, with European Central Bank (ECB) policymakers focusing more on reviving economic growth than controlling inflation. The European Union (EU) is expected to enter a trade war with the United States (US) as President-elect Donald Trump mentioned in its election campaign that the euro bloc will "pay a big price" for not buying enough American exports.

“Protectionist tendencies could disrupt the global supply chains that are essential to European industries, with a negative impact on firms’ growth potential, competitiveness, and financial resilience," Claudia Buch, head of ECB’s supervisory arm, told the European Parliament on Monday.

Fears of a potential trade war could falter Eurozone economic growth and keep inflation well below the bank’s target of 2%. This has also prompted expectations of more interest rate cuts by the ECB. In the December meeting, the ECB is expected to cut its Deposit Facility Rate again by 25 basis points (bps) to 3%.

Meanwhile, the Canadian Dollar (CAD) performs strongly against a majority of its peers after the Canadian inflation data for October came in hotter than expected. Tuesday’s CPI data showed that the headline inflation accelerated at a faster-than-projected pace to 2% against 1.6% in September on year. Economists expected the headline inflation to have grown by 1.9%. Month-on-month headline inflation rose by 0.4%, the same pace at which price pressures decelerated in the previous month. Soft inflation data is expected to weigh on the Bank of Canada's (BoC) dovish bets for the December meeting.

Author

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

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