EUR/GBP Steadies as Markets Overlook Softer Eurozone Inflation
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EUR/GBP recovered its early losses and traded marginally higher near 0.8680 in Thursday’s Asian session, as market traders largely overlooked weaker Eurozone inflation data[1]. Eurostat reported the Harmonised Index of Consumer Prices (HICP) increased by 2.0% YoY in December, down from 2.1% before and in line with forecasts. Core inflation dropped to 2.3% from 2.4%. MoM headline and core inflation rose by 0.2% and 0.3%, respectively, after falling in November[2]. The data had little impact on expectations for European Central Bank (ECB) policy. Inflation remains close to the ECB’s target, and policymakers are taking a cautious, data-dependent stance rather than an urgency to ease further[3] [4]. The markets' focus now shifts to remarks from ECB Vice President Luis de Guindos later today[5][6], which may offer insights into how central bank policymakers view inflation dynamics and the broader economic outlook. The sterling is trading mixed amid a quiet domestic data calendar. The currency is following shifts in global risk sentiment and evolving expectations around the Bank of England’s (BoE) policy and rate changes[7]. With neither side offering a decisive catalyst, EUR/GBP remains within its recent range. The pair is being influenced more by policy outlooks rather than short-term data movements. The EUR/GBP exchange rate remains supported as markets discount softer inflation data and focus on steady central bank guidance.
USD/CAD Advances Amid Oil Supply Concerns and Cautious US Data
USD/CAD trades near 1.3870 in Asia, extending gains for a fifth session amid renewed oil supply concerns that are pressuring the Canadian Dollar[8].
The US signalled plans to restore Venezuelan crude imports, which has raised concerns about more supply and stronger competition for Canadian oil exports. Canadian Prime Minister Mark Carney reiterated that domestic crude remains low risk and competitive; however, markets remain cautious[9].
Carney’s upcoming visit to China from January 13 to 17 highlights efforts to diversify exports away from the United States amid ongoing market uncertainty, though near-term sentiment toward the loonie remains fragile[10].
Domestic data offered limited relief. Canada’s Ivey PMI rose to 51.9 in December from 48.4 previously, marking a return to expansion[11], while upcoming trade balance data may add further direction[12].
The US dollar remains broadly steady as market investors await Friday’s Nonfarm Payrolls[13]. Recent data provides a mixed outlook, with ISM Services PMI improving to 54.4[14] and ADP employment rising by 41,000[15].
Oil market trends are driving short-term moves, so USD/CAD is staying supported even though the US dollar is flat primarily overall. The USD/CAD exchange rate continues to strengthen as oil supply concerns weigh on the Canadian dollar despite steady US data.
EUR/USD Remains Rangebound as Dollar Outlook Dominates
EUR/USD hovers just under 1.1700, maintaining a modest upward tilt. However there is no strong momentum as market traders reassess the evolving US policy outlook. As anticipated by the market, the Federal Reserve (Fed) cut rates in December, though the policy statement proved more influential than the move itself. Fed Chair Jerome Powell signalled that policymakers are in no rush to accelerate easing, emphasising the need for firmer evidence of labour market cooling and inflation returning towards target[16]. Fresh projections reflect a cautious stance[17], with officials expecting only one additional 25 basis point (bps) cut in 2026. Inflation is forecast to decline to 2.4%, while growth should remain near trend. Chair Powell also noted that import tariffs continue to raise prices, attributing part of the inflation challenge to policy decisions[18]. Minutes from late December indicate a divided Fed committee, with limited confidence in further rate cuts unless economic data deteriorates significantly. Recent government shutdowns have reduced data clarity, so policymakers are waiting for additional information before taking further action[19]. In Europe, the ECB has eased on rate changes and maintains a steady approach. Growth has modestly exceeded expectations[20], inflation is near target[21], and service prices remain influential[22]. Policymakers see no immediate need to adjust rates. Market analysts note that the EUR/USD pair is currently driven mainly by the dollar. A sustained move above 1.1800 could boost momentum, but higher US yields remain the main downside risk. The EUR/USD exchange rate remains subdued as cautious Federal Reserve guidance continues to limit upside momentum.
EUR/CAD Climbs as Oil Uncertainty Offsets Canadian Data
EUR/CAD has advanced for a fourth consecutive session, trading near 1.6200 during Thursday’s Asian hours, as oil-related concerns exert downward pressure on the Canadian Dollar.
Renewed attention to potential Venezuelan crude supply has raised concerns regarding increased competition for Canadian exports, keeping the loonie under pressure despite Canadian Prime Minister Mark Carney's reassurances that domestic crude remains competitive[23]. Carney’s upcoming visit to China later this month indicates ongoing efforts to diversify trade partnerships amid uncertain United States policy.
Recent economic data from Canada offered mixed signals. The Canadian Ivey PMI returned to expansion territory in December 2025[24], but markets remain cautious ahead of trade and labour data later this week.
On the European side, the Euro finds support from a steady ECB backdrop. Recent inflation data showed headline HICP rose to 2.0%, but policymakers remain comfortable with current policy settings as growth shows resilience.
Forthcoming German factory orders[25] and Eurozone business climate data may offer additional insights[26]; however, oil market dynamics are expected to remain the primary influence on EUR/CAD in the near term.
Given the prevailing influence of energy markets, EUR/CAD continues to exhibit an upward trading bias. The EUR/CAD exchange rate continues to rise as oil-related pressures weigh on the Canadian dollar.
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