Euro holds gains against Canadian Dollar ahead of BoC rate decision

• Markets price in a 25 bps BoC rate hike on Wednesday, supporting the Canadian Dollar.
• Higher crude prices and Israeli election uncertainty add upside pressure to the commodity-linked CAD.
• The Euro faces pressure from fiscal concerns, bond volatility, and expected ECB rate pauses.

EUR/CAD inches higher after six days of losses, trading around 1.5640 during European hours on Wednesday. The currency cross moved little ahead of the Bank of Canada’s (BoC) policy decision scheduled for later in the day, with financial markets largely pricing in a 25-basis-point interest rate hike.

However, the EUR/CAD could face downside pressure as the commodity-linked Canadian Dollar (CAD) gains support from rising crude oil prices. Higher oil prices followed global market attention on Israel's election results, which could alter the trajectory of the ongoing Middle East conflict. Exit polls indicated a tight race between Prime Minister Benjamin Netanyahu and opposition leader Gadi Eisenkot, showing neither bloc securing an immediate majority. Despite the deadlock, the results point to weakening support for Netanyahu, who has guided the country through nearly three years of continuous conflict.

Looking ahead, market focus will shift to the European Central Bank’s (ECB) policy meeting on Thursday, where the central bank is expected to hold key interest rates unchanged following its 25-basis-point hike in September. Further depreciation for the EUR/CAD cross remains possible, as the Euro was on track to be the worst-performing developed-market currency of the month. High energy costs, ongoing volatility in French government bonds, and persistent concerns over France's fiscal standing are expected to continue exerting selling pressure on the shared currency in the near term.

Germany’s GfK Consumer Climate Indicator edged down to -30.8 heading into November, dropping slightly from -30.6 in October. Although the reading came in marginally better than the market expectation of -31.0, it nevertheless marked the lowest consumer sentiment level since May and remained sharply lower than the -24.1 recorded a year earlier. Persistent anxiety over household finances and elevated inflation continue to suppress consumer spending intentions, dampening overall recovery despite minor improvements in broader economic sentiment.