The Euro strengthened against the Canadian Dollar, with EUR/CAD trading around 1.5950 during European hours on Tuesday, following the release of Germany’s Harmonized Index of Consumer Prices (HICP) inflation data, which showed a year-on-year increase to 3.3% in September from 2.9% in August and 2.8% in July, marking the highest level since December 2023 [1][2]. Destatis President Ruth Brand attributed the acceleration to surging energy costs, particularly heating oil and motor fuels [1]. On a month-over-month basis, German consumer prices rose by 0.6%, matching consensus expectations [1][2].
The Euro’s gains were also supported by a decline in global crude oil prices, which weakened the commodity-linked Canadian Dollar. The drop in oil prices followed an announcement by US President Donald Trump that Russia would supply diesel to global markets, prompting the US to temporarily ease sanctions on Russian fuel to alleviate tight market conditions and curb rising energy prices [1]. However, strategists at ING noted that the weakness in oil was short-lived, as traders quickly refocused on broader supply risks, with ICE Brent settling 1.8% higher, just below $107 per barrel, the highest close since mid-September, due to ongoing Middle East and Persian Gulf supply concerns [1].
In the broader context, the Euro’s moderate gains against the US Dollar were attributed more to USD weakness than intrinsic Euro strength, with EUR/USD trading at 1.1194 after rebounding from 17-month lows near 1.1150 [2]. The Euro remains under pressure due to concerns about France’s fiscal health, rising borrowing costs, and student protests demanding more resources for education [2]. Additionally, elevated oil prices continue to threaten the Eurozone with stagflation risks [2].
Looking ahead, US inflation data is anticipated, with September’s Consumer Price Index (CPI) expected to show a year-on-year increase to 3.7% from 3.4%, and core inflation forecast to rise to 2.5% from 2.4% in August [2]. Producer prices are expected to have grown at a steady 5.4% year-on-year rate, with the core index slowing to 4.4% from 4.6% in August [2]. Cleveland Fed President Beth Hammack reiterated a hawkish stance, calling for more policy restraint, but her comments did not provide support for the US Dollar as markets await further inflation data [2].
CONCLUSION
German inflation accelerated in September, supporting the Euro against the Canadian Dollar and helping it trim losses versus the US Dollar. However, persistent concerns about French fiscal stability, high energy prices, and ongoing geopolitical risks continue to weigh on the Euro’s outlook. Market participants remain focused on upcoming US inflation data for further direction.