EUR/CAD depreciates to near 1.5100 after EMU HICP data, Canadian inflation tracked

• EUR/CAD loses ground following key economic data from the European Monetary Union.
• EMU IAPC MoM showed no change in July, while core inflation fell 0.2%.
• Commodity-linked CAD rises despite a loss in WTI prices.

EUR/CAD is recovering recent gains of the past two days following key data on business activity and consumer prices in the European Union. The pair is trading around 1.5100 during the European session on Tuesday.

Harmonized index of consumer prices (HICP) data from the European Monetary Union (EMU) showed no month-on-month change in July, as expected. Meanwhile, the core HICP fell by 0.2%, in line with the decline seen in June.

Germany’s producer price index (PPI) fell 0.8% year-on-year in July, in line with expectations, following a previous drop of 1.6%. Meanwhile, the monthly index rose 0.2%, also as expected.

Investors anticipate that the European Central Bank (ECB) will gradually reduce interest rates. ECB policymakers have been hesitant to commit to a specific rate cut path amid concerns that price pressures could reaccelerate.

The commodity-linked Canadian dollar (CAD) outperforms despite a continued period of lower crude oil prices and undercuts the EUR/CAD cross. The price of West Texas Intermediate (WTI) oil continued its losing streak for the third day in a row, trading around $72.90 per barrel at the time of writing. This disadvantage is attributed to the easing of geopolitical tensions in the Middle East.

On Monday, US Secretary of State Antony Blinken announced that Israel had agreed to a proposal to resolve issues delaying the Gaza ceasefire and called on Hamas to follow suit. However, senior Hamas official Osama Hamdan criticized Blinken’s statement that Israeli Prime Minister Benjamin Netanyahu had accepted an updated proposal. Hamdan claimed it “raises many ambiguities” and “is not what was presented to us nor what we agreed to,” according to Reuters.

Traders are likely to focus on the risks of slower economic growth in Canada and position ahead of Statistics Canada’s Consumer Price Index (CPI) data due later in the North American session. This inflation report is expected to indicate a further reduction in inflation in July, which could allow the Bank of Canada (BoC) to continue its monetary easing cycle.