The euro remained below its Oct. 16 level against the Canadian dollar on Oct. 21, while French fiscal data and Canadian interest-rate expectations gave currency markets separate developments to watch.
The European Central Bank (ECB) set its reference rate at 1.5779 Canadian dollars per euro, up from 1.5758 on Oct. 20 but below 1.5935 on Oct. 16. The ECB publishes the rate for information, rather than as a transaction price. The reading follows the euro’s earlier decline against the Canadian dollar.
In 10-year government debt, France’s yield premium over Germany briefly reached 157 basis points on Oct. 20, ING reported. That was close to the 159-basis-point high ING recorded on Oct. 2. ING FX strategist Francesco Pesole linked pressure on French bonds to budget concerns and social unrest.
Eurostat reported that France’s 2025 deficit was 5.1% of gross domestic product (GDP), while government debt stood at 115.7% of GDP. ING says weak growth, limits on public spending and unrest complicate efforts to address France’s finances. It expects prolonged high borrowing costs to raise financing expenses for the government and private borrowers over time.
Separately, MUFG senior currency analyst Lee Hardman linked broader Canadian-dollar strength against the U.S. dollar to increased expectations of a Bank of Canada rate rise. In an Oct. 20 note, he said markets had priced in about 21 basis points of increases for the bank’s next meeting, compared with 9 basis points at the end of the previous week. His assessment did not establish a cause for the euro’s move against the Canadian dollar.
The Bank of Canada held its overnight rate target at 2.25% on Sept. 2. Statistics Canada reported that annual inflation rose to 3.1% in September from 3.0% in August, with gasoline prices a leading reason for the increase.
Agence France Trésor lists Oct. 23 as the projected date of Moody’s next ratings decision on France. The Bank of Canada is scheduled to announce its next rate decision and Monetary Policy Report on Oct. 28 at 9:45 a.m. ET (13:45 UTC).
