EUR/CAD Rises Above 1.6050 on Dovish ECB Tone and Weak Canadian Retail Sales

EUR/CAD Bounces Above 1.6050 on Dovish ECB Outlook and Soft Canadian Data

The EUR/CAD pair extended its gains on Friday, trading around 1.6070 during the European session. This marks the third consecutive day of upward momentum, supported by the European Central Bank’s (ECB) dovish policy tone and weaker-than-expected Canadian retail sales data.

ECB Holds Rates, Signals Data-Driven Approach

On Thursday, the ECB left its key interest rates unchanged:

• Main refinancing operations rate: 2.15%
• Marginal lending facility: 2.4%
• Deposit facility: 2.0%

ECB President Christine Lagarde emphasized the need for more data before providing further policy direction, signaling that rate cuts may not be imminent as disinflation progresses in line with projections.

The euro gained ground as markets scaled back expectations for multiple cuts in 2025, offering support to EUR-denominated crosses such as EUR/CAD.

Related Read: ECB Policy Snapshot: Lagarde’s Strategy Going Forward

Canadian Retail Sales Disappoint

On the Canadian side, Statistics Canada reported that Retail Sales fell 1.1% month-over-month in May, matching market expectations but representing a noticeable decline from April’s 0.3% increase. Retail Sales excluding Autos also dropped by 0.2%, further weighing on the Canadian Dollar (CAD).

The data indicates weaker consumer demand, which could delay any tightening measures by the Bank of Canada, limiting the CAD’s strength despite support from firm crude oil prices.

Oil Prices Provide Limited Support to CAD

While rising crude oil prices—a key Canadian export—typically support the CAD, the effect was muted due to broader weakness stemming from the retail report and ongoing central bank uncertainty.

Key Takeaways

• EUR/CAD trades near 1.6070, gaining for the third session in a row.
• ECB leaves rates unchanged, with Lagarde highlighting data dependency.
• Canada’s retail sales fall 1.1%, adding downside pressure to the CAD.
• Crude oil prices offer limited support to a weakening Canadian Dollar.

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