The euro rallied against the loonie last Friday despite the release of mixed economic data from both Europe and Canada. The European flash manufacturing PMI for April missed estimates. Likewise, Canada’s retail sales declined in February. As the ECB is expected to implement another rate hike in the upcoming policy meeting, unlike the Bank of Canada, the euro continues to strengthen against its peers, including the Canadian dollar. Overall, the EUR/CAD pair rallied from a low of 1.4757 to a high of 1.4884 in the past 24 hours.
The HCOB German manufacturing PMI (purchasing managers’ index) declined to 44 in April from 44.70 in March and disappointed the market, which was expecting an improvement in the index reading to 45.60. A reading below 50 indicates contraction, and vice versa. The reported reading represents the steepest decline in manufacturing activity since May 2020. Notably, for the 10th successive month, German manufacturing activity has contracted. This is against the backdrop of a sharp decline in stock purchases combined with an improvement in supplier delivery times. During the same period, input cost pressures eased, with purchasing expenses declining at the quickest rate in nearly three-and-a-half years.
Also, the HCOB German flash industrial production index inched lower to 50.30 in April from 50.50 in March.
The HCOB German flash services PMI rose to a 12-month high of 55.70 in April, from 53.70 in March, and surpassed forecasts of 53.30.
Overall, the HCOB German flash composite PMI increased to a 12-month high of 53.90 in April from 52.60 in the previous month.
The HCOB Eurozone flash manufacturing PMI declined to a 35-month low of 45.50 in April from 47.30 in March. Economists had forecast an improvement in the reading to 47.90. The reading reflects the steepest contraction in the manufacturing sector since May 2020. Fresh orders declined to their lowest level in four months. Furthermore, the backlog of orders declined while employment growth dropped to the lowest level in the last 27 months.
During the same period, input costs declined for a second successive month and at the steepest rate since May 2020, against the backdrop of reduced energy costs. Supplier delivery times improved for the second consecutive month. Business optimism declined slightly.
Also, the HCOB Eurozone flash industrial production index declined to a four-month low of 48.50 in April from 50.40 in March.
The HCOB Eurozone flash service index rose to a 12-month high of 56.60 in April from 55 in March and surpassed the forecast of 54.60.
Overall, the HCOB Eurozone flash composite PMI hit an 11-month high of 54.40 in April, up from 53.70 in the prior month.
According to Statistics Canada, the country’s retail sales fell by 0.20% m-o-m in February to C$66.30 billion, following an increase of 1.60% in the previous month but slightly better than forecasts of a 0.60% decline.
Sales declined in four out of nine subsectors, reflecting 48% of retail trade. The decrease was led by a 5% drop in sales at gasoline stations and fuel vendors and a 1.60% decrease at general merchandise retailers. However, the decline was partly negated by the seventh successive rise in sales of motor vehicles and parts at 0.90%.
In volume terms, Canada’s retail sales fell by 0.70% in February.
Excluding volatile goods, core retail sales inched up 0.10% m-o-m in February. The increase was led by a 4.40% rise in the sales of clothing, clothing accessories, shoes, jewelry, luggage, and leather goods.
The statistical organization also stated that retail e-commerce sales rose by 7.80% in February to C$3.70 billion, representing 5.50% of aggregate retail trade, compared with 5.10% in the previous month.
The mixed economic data from both Europe and Canada is expected to keep the EUR/CAD pair range bound in the short term.
The historical price chart indicates that the EUR/CAD pair is rising after testing support at 1.4760. The next resistance is anticipated only near 1.5090. Additionally, the currency pair is trading above its 50-day moving average, while the stochastic indicator is in the bullish zone. Therefore, we anticipate the EUR/CAD pair to remain in an uptrend in the days ahead.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
