Bank of America (BofA) shifted its stance for the current week to a bullish view on the euro against the Canadian dollar (). The bank’s positioning analysis indicates an expectation for a continuation of the spot uptrend. Furthermore, BofA’s Cross-Asset Risk Analytics System (CARS) model supports bullish EURCAD prospects, 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 in line with consensus expectations, could be the first example since 2021 of both the median and trim core CPI measures falling below 3%.
A CPI value that meets targets could increase the likelihood of a BoC rate cut in June. BofA suggests that such an outcome could result in a rise in the EURCAD exchange rate as expectations for interest rate cuts by the BoC move closer to those of the European Central Bank (ECB).
The bank’s analysis implies that Canadian CPI data, released this week, plays a crucial role in the potential movement of the EURCAD pair. Should the CPI numbers turn out higher than expected, this could pose a risk to BofA’s bullish forecast for the currency pair.
The bank’s outlook is based on the premise that a consensus CPI may trigger an earlier start to the BoC’s rate-cutting cycle. This development is expected to favor the euro against the Canadian dollar in the short term.
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