Euro Reaches 1-Year High

The rally in the Euro followed comments from ECB President Mario Draghi at a central bankers’ conference in Portugal suggesting that deflationary forces had been replaced by reflationary tendencies. Draghi however tried to temper his hawkish tone by adding that any change in the ECB's monetary policy stance would be gradual, especially when taking into account the Euro Area economy’s need for "considerable" monetary support.

A raft of recent economic indicators suggests activity in the region is gaining momentum. Investor speculation has been growing that the ECB will announce further asset purchase cuts during the second half of the year. The positive assessment of the economy from a traditionally more dovish Draghi has further reinforced that view. In the aftermath of the remarks, EURGBP has been surging higher, surpassing key resistance at 0.8870 and was last seen trending around the 0.8880-mark.

Bank of Canada Governor Stephen Poloz attempted to temper market expectations with his comments on the Canadian economy on Tuesday, indicating that growth is likely to moderate in the coming months after an exceptionally strong start to the year. Canada lost over CAD 60 billion in national income since crude oil prices tumbled in 2014.

The Central Bank, with a view to reviving the economy, slashed interest rates by 50 basis points the following year to help offset the decline. Bank of Canada Governor Stephen Poloz reckons those cuts have "done their job," as evidenced by the 3.70% annualized growth recorded during the first quarter. However, Poloz added that the upcoming re-negotiation of the North American Free Trade Agreement could prove to be a major headwind as businesses hold back on investment decisions. Following a steep rally on Tuesday, EURCAD is correcting lower in early Wednesday trade, with prices hovering around 1.4930.