EURCAD is the ticker symbol for the euro to Canadian dollar exchange rate. Both the euro and the Canadian dollar are considered major currencies, but the EURCAD is considered a minor pair because it does not contain the US dollar (the world’s most traded currency). Minor currency pairs are typically less liquid and more volatile than major pairs. This means that they are generally traded with relatively wider spreads than major currencies.
In the EURCAD Forex rate, EUR is the base currency, whereas CAD is the quote currency. This simply means that at any given time, the price of EURCAD represents the one euro to CAD rate which means the amount of Canadian dollar it would take to exchange for one unit of the euro.
History of the EURCAD
EURCAD is a popular pair because it combines two influential currencies. As of February 2022, the euro is the world’s second most traded currency, whereas the Canadian dollar is the sixth most traded.
The euro was introduced on January 1st, 1999, and it is currently the official currency of the Eurozone, which consists of 19 member states of the European Union. It is also the second most reserve-held currency in the world, and there are at least 22 countries outside the Eurozone that peg their national currencies to the euro. The single currency (as it is commonly referred to) is administered and managed by the European Central Bank. Despite some problems, the euro has been credited with facilitating efficiency in payments systems, promoting price and economic stability, as well as boosting tourism, trade, and investment within the Eurozone. Some of the Eurozone’s largest economies include Germany, France, Italy, Spain, and the Netherlands.
On the other hand, the Canadian dollar is the official currency of all the 10 provinces and 3 territories within Canada. The currency has earned the nickname ‘Loonie’, because of the image of a common loon that is usually on the back of its notes and coins. While the euro is largely considered a modern currency, the ‘Loonie’ traces its roots way back to the 17th century when French colonists introduced coins to the region. French rule came to an end in 1760, with the British taking over the territory and introducing the Canadian pound. There was intense debate in the mid-19th century on whether the country should continue the Sterling system or adopt a Decimal system (based on the US dollar) to promote local trade. The debate ended in 1858 when the Canadian dollar replaced the Canadian pound. There are no currencies pegged to the CAD, and the CAD itself freely floats in the market. The CAD is administered and managed by the Bank of Canada.
EURCAD Historical Price Performance
The euro to CAD pair traded around 1.5000 at the turn of the millennium. It initially drifted lower to around 1.2600 before climbing to highs of circa 1.6900 by early 2004. During the 2007/8 Great Recession, the pair swung between 1.3000 and 1.8000. In recent years, the pair has been contained between 1.4000 and 1.6000 (as of February 2022).
Major Bodies Influencing the EURCAD – EUR to CAD Trading
The European Central Bank (ECB)
The ECB is one of the most influential central banks in the world. As the bank tasked with maintaining price and economic stability within the Eurozone, it naturally has the biggest influence on the single currency. To achieve its mandate, the bank is responsible for setting the monetary policy within the economic bloc as well as overseeing the national policies of other central banks within its jurisdiction. When EUR/CAD trading, EURCAD traders track the release of interest rates as well as the tone and content of monetary policy statements by the ECB. The ECB is also an active player in the forex trading markets, and in recent years has engaged in quantitative easing programs that have had a massive impact on the value of the euro.
The Bank of Canada (BOC)
The BOC is the central bank of Canada and its roles include keeping inflation low, stable, and predictable; ensuring a stable and efficient financial system; issuance of banknotes; as well as providing funds management for the Canadian government. By setting the monetary policy of Canada, the BOC can influence the value of the CAD directly. For instance, if it raises interest rates, the value of the CAD will tend to increase, and vice versa.
Statistics Canada is the national statistics office of Canada. The agency is mandated to provide objective statistical information on Canada’s population, economy, society, and environment. Some of the agency’s key indicators that are watched by CAD traders include Consumer Price Index, Unemployment Rate, and Retail Sales. These indicators can influence the monetary policy decisions or direction of the Bank of Canada.
Canada is also a major global producer and exporter of commodities such as crude oil, gold, wheat, and aluminium. Data on the international prices of these commodities can also influence the value of the CAD.
Assets that are positively correlated typically move in the same direction over time, whereas assets that have a negative correlation tend to move in opposite directions over time. Some of the assets that are positively correlated with EURCAD include the USDCAD, AUDCAD, EURGBP, and EURSGD. Some of the assets that have a negative correlation with the EURCAD include CADCHF, USDRUB, CADJPY, and XAGEUR.