Bank of America (BofA) shifted its stance to a bullish view on the Euro versus the Canadian dollar (EURCAD) for the current week. The bank's positioning analysis indicates an expectation for the continuation of the spot uptrend. Additionally, BofA's Cross-Asset Risk Analytics System (CARS) model supports a bullish EURCAD outlook based on positive signals from interest rates and commodities.
The market is currently debating whether the Bank of Canada (BoC) will begin its rate-cutting cycle in June or July. The upcoming Canadian Consumer Price Index (CPI) release, if it aligns with consensus expectations, could mark the first instance since 2021 of both median and trim core CPI measures dropping below 3%.
An on-target CPI reading might increase the likelihood of a June rate cut by the BoC. BofA suggests that such an outcome could result in a rise in the EURCAD exchange rate, as expectations for BoC rate cuts move closer to those of the European Central Bank (ECB).
The bank's analysis implies that the Canadian CPI data, due for release this week, plays a crucial role in the potential movement of the EURCAD pair. Should the CPI figures come in higher than anticipated, it could pose a risk to BofA's bullish forecast for the currency pair.
The bank's outlook hinges on the premise that a consensus-matching CPI will potentially prompt an earlier start to the BoC's 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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