Bank of America (BofA) has shifted its stance to a bullish view on EURCAD () for the current week. The bank's positioning analysis indicates that the immediate upside trend is expected to continue. In addition, Bank of America's Cross-Asset Risk Analysis System (CARS) model supports a bullish outlook for the EUR/CAD based on positive signals from interest rates and commodities.
The market is currently debating whether the Bank of Canada (BoC) will begin its interest rate cutting cycle in June or July. Canada's upcoming Consumer Price Index (CPI) release, if in line with consensus forecasts, could mark the first example since 2021 of the median and core CPI measures falling below 3%.
A targeted Consumer Price Index (CPI) reading could increase the likelihood of a Bank of Canada rate cut in June. Bank of America notes that such an outcome could lead to a rise in the euro/Canadian dollar exchange rate, as interest rate cut expectations from the Bank of Canada approach those of the European Central Bank.
The bank's analysis indicates that Canadian CPI data, due this week, plays a crucial role in the potential movement of the EUR/CAD pair. If the CPI numbers come in higher than expected, this could pose a risk to Bank of America's bullish outlook for the currency pair.
The bank's forecasts are based on the assumption that a consensus CPI could lead to an early start to the Bank of Canada's interest rate cutting cycle. This development, in turn, is expected to favor the euro against the Canadian dollar in the near term.
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