BoC rate decision nears as Euro maintains gains against Canadian Dollar

• A 25 bps BoC rate rise on Wednesday is priced into markets. That expectation underpins the Canadian Dollar.
• The commodity-linked CAD receives further support from climbing crude prices and uncertainty surrounding Israel's election.
• Fiscal worries, volatile bond markets and expectations of ECB rate pauses weigh on the Euro.

EUR/CAD trades near 1.5640 in Wednesday's European session. The cross has edged up following six consecutive days of declines. Movement remained limited before the Bank of Canada’s (BoC) policy announcement later in the day, with a 25-basis-point interest rate increase largely priced into financial markets.

Rising crude prices could nevertheless weigh on EUR/CAD by strengthening the commodity-linked Canadian Dollar (CAD). Oil advanced as global markets focused on Israel's election results and their potential to reshape the course of the ongoing Middle East conflict. According to exit polls, Prime Minister Benjamin Netanyahu and opposition leader Gadi Eisenkot were locked in a close contest, with neither bloc winning an immediate majority. While the outcome remained deadlocked, it signalled declining support for Netanyahu after his leadership through nearly three years of uninterrupted conflict.

Thursday's European Central Bank (ECB) policy meeting is the next focus for markets. Following a 25-basis-point increase in September, the ECB is expected to leave its key interest rates unchanged. EUR/CAD could decline further, with the Euro on course to rank as the month's weakest developed-market currency. In the near term, elevated energy costs, continued volatility in French government bonds and lingering worries about France's fiscal position are expected to sustain selling pressure on the single currency.

At -30.8 heading into November, Germany’s GfK Consumer Climate Indicator slipped from October's -30.6. The result was slightly above the market forecast of -31.0 but still represented the weakest consumer sentiment since May. It was also well below the -24.1 registered a year earlier. Households' persistent financial concerns and high inflation continue to curb their willingness to spend. These pressures are restraining the overall recovery despite modest gains in broader economic sentiment.