Euro Stabilises After Sell-Off as Markets Await US CPI and Bank of Canada Meeting

The euro is showing signs of a modest recovery following a sharp decline triggered by a strong US employment report and increased demand for safe-haven assets amid escalating geopolitical tensions in the Middle East. Robust Nonfarm Payrolls data confirmed the resilience of the US labour market, allowing the dollar to strengthen against most major peers and reinforcing expectations that the Federal Reserve will maintain a restrictive policy stance.

Investor attention today will be focused on the release of US inflation data. According to forecasts, annual consumer price growth may accelerate to 4.2% from 3.8% previously, while core inflation is expected to rise to 2.9% from 2.8%. Should the figures exceed expectations, markets may once again reassess the outlook for Federal Reserve rate cuts, providing additional support for the US dollar.

Another key event will be the Bank of Canada policy meeting. The central bank is widely expected to leave its benchmark interest rate unchanged at 2.25%, although market participants will be paying close attention to the accompanying statement and policymakers' comments regarding the future path of monetary policy. Any signals pointing towards further easing could weigh on the Canadian dollar and support gains in EUR/CAD.

EUR/USD

After breaking below the key support level at 1.1580 last week, EUR/USD buyers managed to push the pair back towards this area. Technical analysis suggests the pair may retest support near 1.1500. A break below this level followed by sustained trading underneath it could trigger a fresh bearish impulse, with initial downside targets in the 1.1400–1.1440 region. The bearish scenario would be invalidated by a decisive move back above 1.1580.

Key events for EUR/USD:

• Today at 12:30 (GMT+3): German 10-year government bond auction;
• Today at 15:30 (GMT+3): US Consumer Price Index (CPI);
• Tomorrow at 15:00 (GMT+3): Germany's seasonally unadjusted current account balance.

EUR/CAD

EUR/CAD is also undergoing a corrective recovery following its previous decline, although further direction will largely depend on the outcome of the Bank of Canada meeting and the market's reaction to US inflation data. Ahead of these releases, traders are likely to remain cautious, potentially encouraging consolidation around current levels.

Technical analysis points to range-bound trading within the 1.6030–1.6150 corridor. Price behaviour near these boundaries over the coming sessions may provide clearer signals regarding the pair's next directional move.

Key events for EUR/CAD:

• Today at 16:45 (GMT+3): Bank of Canada interest rate decision;
• Today at 17:30 (GMT+3): US crude oil inventories;
• Today at 17:30 (GMT+3): Bank of Canada press conference.

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