• Canada’s GDP delivers a strong upside surprise in Q3, supporting the Canadian Dollar.
• The Euro trades without a clear direction amid divergent indicators in the Eurozone.
• EUR/CAD falls to 1.6180 on Friday, down 0.50% on the day.

EUR/CAD trades around 1.6180 on Friday at the time of writing, down 0.50%, as macroeconomic developments strengthen the Canadian Dollar (CAD) while leaving the Euro (EUR) lacking momentum. The European currency reacts to mixed data, whereas the Canadian economy showed a stronger-than-expected recovery in the third quarter.

In the Eurozone, Friday’s releases paint a contradictory picture. In France, the preliminary Harmonised Consumer Price Index (HICP) remained subdued at 0.8% YoY in November, below expectations and unchanged from the previous month. Italy delivered a more encouraging signal, with Q3 Gross Domestic Product (GDP) rising 0.1% QoQ, slightly above forecasts, and the annual rate improving to 0.6% YoY. Preliminary November inflation figures showed a slowdown, with Italian HICP easing to 1.1% YoY.

Germany adds another layer of mixed signals. Headline Consumer Price Index (CPI) inflation remains steady at 2.3% YoY in November, while the harmonised HICP increases to 2.6% YoY, exceeding expectations. Labour-market conditions remain broadly stable, with unemployment rising by only 1,000 people, keeping the Unemployment Rate at 6.3%.

With such uneven signals, the outlook for the European Central Bank (ECB) remains cautious, reinforcing expectations that monetary policy may stay on hold in the coming months.

By contrast, the Loonie benefits from a clearly stronger macroeconomic backdrop. According to Statistics Canada, Q3 GDP grew 0.6% QoQ, reversing the previous quarter’s contraction, while the annualised rate surged to 2.6%, well above consensus. The details show that external trade was the main driver of growth, as exports rose slightly while imports fell sharply, even though domestic demand weakened.

Analysts at TD Securities note that this robust GDP reading raises the bar for any further easing by the Bank of Canada (BoC). Markets increasingly expect the central bank to adopt a wait-and-see stance after cutting its policy rate in October. The bank also highlights that the CAD “remains structurally cheap above 1.40”, suggesting that continued economic firming could support the currency further.