Euro drops against Canadian Dollar despite stronger German Retail Sales

EUR/CAD weakens as lower prices lead markets to scale back ECB rate hike expectations, countering German retail growth.
Germany’s Retail Sales jumped 1.1% MoM and 1.8% YoY, comfortably beating forecasts.
The commodity-linked CAD could struggle amid lower oil prices.

Akhtar Faruqui FXStreet

EUR/CAD depreciates after two days of gains, trading around 1.6220 during the early European hours on Tuesday. The currency cross remains subdued as the Euro (EUR) holds losses following the release of German Retail Sales data.

Germany’s retail sector saw a surprise rebound in May, with consumer spending jumping 1.1% month-on-month and 1.8% annually, comfortably beating market forecasts, according to Destatis. However, the strong consumer data is being balanced by retreating energy prices, causing markets to pare back aggressive European Central Bank (ECB) rate hike expectations.

While Oxford Economics and Capital Economics project that ECB interest rates have peaked, traders are still factoring in one final quarter-point increase to 2.50%, looking ahead to Tuesday's preliminary German inflation data for definitive direction.

The downside of the EUR/CAD cross could be limited as the commodity-linked Canadian Dollar (CAD) struggles under the weight of lower oil prices. Lower oil prices put downward pressure on the loonie dollar as Canada is one of the largest crude exporters.

Crude oil prices face downward pressure as traders monitor potential United States (US)-Iran talks in Doha later in the day amid a fragile interim ceasefire. Reuters cited KCM Trade Chief Market Analyst Tim Waterer, who noted that while investors are pricing in hopes for a positive outcome, a true normalization of oil flows through the Strait of Hormuz remains unseen. "The market is cautiously hopeful but still hedging its bets until we see more tangible signs of de-escalation," Waterer stated.

Economic Indicator

Retail Sales (YoY)

The Retail Sales released by the Statistisches Bundesamt Deutschland is a measure of changes in sales of the German retail sector. It shows the performance of the retail sector in the short term. Percent changes reflect the rate of changes of such sales.The changes are widely followed as an indicator of consumer spending. The positive economic growth anticipates "Bullish" for the EUR, while a low reading is seen as negative, or bearish, for the EUR.

AUD/USD bulls seem hesitant near 0.6950

AUD/USD attracts some buyers for the second straight day, though it remains confined within Friday's broader range amid mixed cues. The US PCE data and the US NFP report released last week tempered October Fed hike bets, dragging US bond yields away from multi-year highs and keeping US Dollar bulls on the back foot. However, geopolitical uncertainty is a tailwind for the safe-haven buck, while the RBA's cautious outlook caps the Aussie.

USD/JPY remains confined in a range below 158.00

USD/JPY holds steady around 157.75 during the Asian session on Monday, trading within a one-week-old range. Against the backdrop of soft US PCE data, the US NFP report, released on Friday, tempers October Fed rate-hike bets and drags US bond yields away from multi-year highs. Furthermore, hawkish BoJ expectations amid looming intervention risks support the Japanese Yen, capping the pair. However, geopolitical uncertainty acts as a tailwind for the safe-haven buck and limits the downside.

Gold trades with positive bias around $4,150; upside seems capped

Gold attracts some dip-buyers at the start of a new week, though it remains confined in a familiar range held over the past week or so. Against the backdrop of soft US PCE data, Friday's weak US NFP report tempered bets of an October Fed rate hike. This, in turn, drags US bond yields away from multi-year highs and benefits the non-yielding bullion. The US Dollar, however, draws support from geopolitical uncertainties and could act as a headwind for the precious metal.

Week ahead: Fed minutes in the spotlight amid bond market rout

The first full week of October and the final quarter of the year get underway with little fanfare in terms of the economic agenda. But far from being short on excitement, the coming week will test market nerves, as government bond yields continue to soar on growing worries that the energy crisis will only get worse, fuelling inflation.

CFTC Report: Speculators turn more defensive as Oil exposure falls

The week in one sentence: During the week leading up to September 29, long positions in crude oil were significantly reduced, while short positions in the Canadian Dollar went up. In addition, the positioning of the Australian Dollar and the Japanese Yen declined, while Coffee buying stood out against a more general background of defensiveness.

The Euro is near a one-year low: Inflation could trigger its rebound, not its fall

EUR/USD has fallen to its lowest level since May 2025. The pair hit 1.1312 on Wednesday and trades well below the January peak of 1.2082. The decline reflects a powerful combination of US Dollar strength, geopolitical uncertainty and renewed concerns about Europe's exposure to higher energy prices.