The Eurodollar remained range-bound against the Canadian dollar yesterday following the release of weak economic data from both Europe and Canada. While the Eurozone Sentix investor confidence for May dipped more than anticipated, the Canadian building permits for March recorded an unexpected decline. Overall, the EUR/CAD pair remained range-bound between 1.3590 and 1.3660 in the last 24 hours.
According to the data published by the France Ministry for the Economy and Finance, the country’s trade deficit widened to €12.40 billion in March, from €10.40 billion in the prior month and higher than the €11.20 billion deficit anticipated by economists.
Notably, French goods exports rose by 5.30% in the March 2022 quarter, compared with a 4.70% increase in the earlier quarter. Imports grew by just 5.3% in 1Q 2022, following a 9.90% surge in the December 2021 quarter.
Overall, the quarterly trade deficit was €31 billion, down €1.50 billion from the prior quarter. Worrisomely, the trade deficit for 1Q 2022 surpassed the record high level reached in 4Q 2021. The sharp widening of the trade deficit was led by energy, which saw an increase in deficit by €3.90 billion. However, the manufacturing deficit narrowed by €2.50 billion. Transport equipment surplus improved sharply by €3.20 billion.
The Sentix business cycle (investor confidence) index for the Eurozone worsened to -22.60 in May, from -18 in the prior month, and missed the reading of -21.70 anticipated by economists.
The current situation index declined to -10.50 in May, from -5.50 in the earlier month. Also, the expectations index fell to -34, from -29.80.
In the US, the Sentix investor confidence index declined to -2.90 in May, from 6.10 in April. The current situation index fell to 18, from 24.50. The expectations index worsened to -21.80, from -10.80.
Overall, the global Sentix investor confidence index dropped to -13.30 from -5.40. The current situation index declined to -4.80, from 3.80. Also, the expectations index worsened to -21.50, from -14.10.
In the US session, Statistics Canada stated that building permits fell by 9.30% m-o-m in March, following a 21% rise in the earlier month and missed the 3.40% growth anticipated by economists.
In value terms, building permits stood at C$11.70 billion in March. The decline was led by a 29.50% decrease to C$3.70 billion in the non-residential sector. Residential permits rose by 4.70% to C$7.90 billion in March. Inclination to construct single-family homes grew by 3.30%, hitting the highest value since March 2021.
Specifically, the institutional component fell by 58.50% and returned to the usual levels after permits for two large hospital projects were granted in February. Also, the aggregate value of building permits grew by 5.30% q-o-q in March 2022 quarter. In value terms, the total value of building permits was C$34.90 billion in the first quarter.
The weak 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 the support at 1.3590. The next resistance is anticipated only near 1.3720. Additionally, the currency pair is trading above its 50-day moving average, while the stochastics indicator is in the bullish zone. Therefore, we are anticipating the currency pair to remain in an uptrend in the short term.
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.
