EUR/CAD steadies as EU tariff delays and robust Canadian data drive mixed momentum
- EUR/CAD is consolidating with prices trading flat around 1.5607.
- The Euro receives a boost from the delay in US tariffs on EU imports.
- Canada remains supported by robust Retail Sales that benefit the CAD.
The Euro (EUR) is firming against the Canadian Dollar (CAD) on Monday, bolstered by easing trade tensions after the United States announced a delay in implementing new tariffs on European imports.
After falling below the 10-day and the 20-day Simple Moving Averages (SMA) on Friday, EUR/USD prices have stalled with the pair trading flat at 1.5607 at the time of writing.
The President of the European Central Bank (ECB), Christine Lagarde, and the President of the Deutsche Bundesbank, Joachim Nagel, are expected to speak shortly. Dovish comments or concerns over the economic outlook may serve as an additional catalyst for the EUR/CAD pair.
US tariff threats on imports from the European Union drive sentiment
Earlier concerns around a proposed 50% blanket tariff on EU goods, initially set to take effect on June 1, had weighed heavily on the single currency.
This uncertainty allowed EUR/CAD bears to drive the pair lower in recent sessions. However, reports of a positive phone call between former US President Donald Trump and European Commission President Ursula von der Leyen helped shift sentiment.
“We had a very nice call, and I agreed to move it,” Trump said before returning to Washington from New Jersey. “She said we will rapidly get together and see if we can work something out.”
Von der Leyen echoed the sentiment, stating on the social media platform X:
“Europe is ready to advance talks swiftly and decisively. To reach a good deal, we would need the time until July 9.”
This diplomatic breakthrough offered the Euro a fresh bout of optimism in early Monday trading, limiting recent downside and stabilizing EUR/CAD around key support levels.
Meanwhile, Canadian Retail Sales data released on Friday provided a mixed picture of domestic demand. Retail Sales rose 5.6% YoY in March, well above the 3.8% forecast, supported by robust automotive and general merchandise purchases. However, on a monthly basis, sales slowed to 0.5% in March, down from February’s 0.8%, though still easily outperforming the expected 0.1% decline.
The combination of upbeat Canadian data and the Euro’s recovery on geopolitical relief has created a tug-of-war dynamic for the EUR/CAD pair, with short-term direction likely hinging on incoming inflation data and central bank commentary later this week.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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