Euro Gains Against Canadian Dollar Following German Data

• EUR/CAD gains strength after Germany's October Manufacturing PMI was confirmed at 54.2, signaling robust expansion.

• German Retail Sales plunged 2.0% MoM in September, missing expectations of a 0.4% gain as spending weakened.

• Falling oil prices driven by OPEC+'s decision to hold December output targets steady could weigh on the Canadian Dollar.

EUR/CAD gains over 0.5% after registering modest gains the previous day, trading around 1.5680 during Asian hours on Monday. The currency cross rises as the Euro (EUR) remains stronger following the release of German economic data.

The S&P Global Germany Manufacturing PMI was confirmed at 54.2 in October, the second-highest for almost four-and-a-half years, just behind August's recent peak, and compared to 53.9 in September. German Retail Sales, a key measure of consumer spending, dropped by 2.0% MoM in September, compared to a rise of 1.2% in August (revised from 1.3%). This figure came in weaker than the market expectations of a 0.4% rise. On an annualized basis, Retail Sales came in at -2.3% in September, versus a 0.3% decline prior (revised from -0.4).

The EUR/CAD cross rises as the commodity-linked Canadian Dollar (CAD) could face headwinds from falling oil prices. Crude prices declined following an agreement by OPEC+ to maintain steady oil production targets for December, keeping required production at September levels. Under this arrangement, Saudi Arabia’s allocation is set at 10.478 million barrels per day (bpd), followed by Russia at 9.949 million bpd and Iraq at 4.431 million bpd.

Meanwhile, crude oil prices also faced downward pressure as investors weighed ongoing diplomatic efforts to end the Middle East conflict against fears of renewed US military action against Iran. Qatari and Iranian officials continued their discussions for a third consecutive day, seeking an agreement to end the war ahead of the US midterm elections.

Energy surge compounds market stress as investors question AI trade

Strategists at Deutsche Bank highlight that the past month was marked by a confluence of pressures, as “investors grappled with mounting doubts around the AI trade, French sovereign stress, and higher energy prices.” In their review, they note that Brent crude “(+13.6%) extended its rise amid concerns over renewed US-Iran escalation,” underscoring how geopolitical tensions have fed directly into the energy complex. At the same time, European gas markets tightened, with “European natural gas [rising] above €100/MWh for the first time since 2022,” adding another layer of strain to an already challenging backdrop for risk assets.