Euro shows little movement against Canadian Dollar after Germany’s IFO business data

• EUR/CAD holds steady as October’s German IFO Institute Business Climate Index rises to 90.2.
• Markets found relief in Moody’s unexpected decision to retain France’s Aa3 rating with a negative outlook, Deutsche Bank notes.
• Pressure weighed on the Canadian Dollar as crude oil declined following President Trump’s decision to rule out immediate military action against Iran.

EUR/CAD remains in positive territory near 1.5710 during Monday’s European session, although it has retreated from a gap-up opening. Germany’s IFO business data release has prompted little movement in the cross.

 At 90.2 in October, the German IFO Institute Business Climate Index is up from September’s 89.9 and above the market forecast of 89.8. The IFO Current Assessment Index, however, slips to 88.8 from 89.5 previously. Meanwhile, the Expectations Index rises from 90.4 to 91.6. This index serves as an early gauge of current conditions and business expectations over the next six months.

Does Moody’s Aa3 decision give France breathing space?

France secured some relief towards the close of last week, according to Deutsche Bank analysts, who note that the sovereign “got a boost on Friday night as Moody’s defied market expectations and maintained their Aa3 rating (negative outlook).” In their view, the decision helped calm markets following the recent volatility in French assets. Investors nevertheless remain alert to the possibility of future action, given the negative outlook.

Gains in EUR/CAD persist as weaker oil prices weigh on the commodity-linked Canadian Dollar (CAD). The decline in crude followed US President Donald Trump’s rejection of immediate military action against Iran. According to Al Jazeera, he stated, “there will not be a strike today,” having earlier suggested that Washington might have to “finish the job” or potentially secure an agreement with Tehran. Those earlier comments came amid increasing Iranian and Houthi threats to American interests in the region.

Will the BoC leave rates unchanged in October, as Rabobank expects?

Despite market pressure for further tightening, Rabobank strategists see the BoC maintaining its current policy stance. They write that they “expect the Bank of Canada to hold the overnight policy rate at 2.25% at the October 28 meeting,” reinforcing their expectation of unchanged rates.