I'd like to pick the thoughts of some of you more serious traders on this pair. I'm finding myself at a loss to explain the parabolic trajectory as of late. Any ideas behind it?
Euro getting stronger while loonie getting weaker? Seriously, I don't know if there is a direct relationship here, weaker oil and the forthcoming change in taxes on income trusts would explain selloff in cad, while euro seems to be getting stronger vs everything else.
At least someone took the time to answer, thanks My issue is trying to understand why the EUR would get stronger versus why the CAD weaker vis-a-vis the dollar. Especially in light of the end of the money energy flows to CAD. Of course, there's really no logic behind the EUR's upmove here either, in my opinion.
I am no expert and haven't really looked into the correlation you mention but can add for your indulgence that sometimes strength in one currency comes from weakness of another, not strength in the currency being looked at in itself. If I am not mistaken there is a seasonal tendency for the EUR to rally towards the end of the year and selloff after new year thru march/april. Good luck.
You are not mistaken. But I'm after the underlying reason that occurs. Why does the EUR perform so well at year end?
Well CAD is generally underperforming on the crosses (look at GBP/CAD) mainly due to the market 'catching up' on the rate outlook, i.e. BoC probably already cutting rates next year by the time ECB, BoE and the rest are still not done raising them.
After this mornings Canadian numbers, BoC isn't cutting anything. And as usual, the market is messed up on the rate outlook of the ECB and BoE.
If people are expecting more weakness in US economy than is currently priced in, one might extrapolate that demand for cad would drop as well, especially as energy needs temper. You could also want to consider that it's just coincidence that EUR/CAD is making an outsized move at this point, relative to where it was trading before. I mean, you could make a spread out of anything that has gone up/gone down recently (Platinum/Cotton, for example), but does that necessarily mean a trade is available for that specific pair, as opposed to just trading one or the other? Just trying to follow up on my first reply, didn't want you to think I was being cheeky for the sake of it
I didn't say they are cutting tomorrow. But the core inflation slightly above 2% was forecast by the BoC last month, so hardly a surprise. Compare with the inflation picture in the US and you get the idea. Bottom line is, yield differentials are not moving in CAD's favour with BoE and ECB raising AT LEAST one more time. Add softer commodities and you get IMM specs piling up on the short CAD side.
Yep, it's the specs. I'm all for dollar weakness. But the piling on the Euro is ridiculous, in my opinion.