Germany's IFO business data: Euro holds steady against Canadian Dollar

• 90.2 is October’s improved German IFO Institute Business Climate Index reading. EUR/CAD holds its ground.
• Markets gained relief when Moody's unexpectedly retained France’s Aa3 rating with a negative outlook, Deutsche Bank notes.
• Lower crude prices weighed on the Canadian Dollar after President Trump dismissed the prospect of immediate military action against Iran.

EUR/CAD trades near 1.5710 during Monday’s European session. The cross has eased from its gap-higher opening but remains in positive territory. Germany’s IFO business data prompted little reaction.

 At 90.2 in October, the German IFO Institute Business Climate Index is up from September’s 89.9 and above the market forecast of 89.8. The Current Assessment Index, however, slips to 88.8 from 89.5. Meanwhile, the Expectations Index rises to 91.6 from 90.4. It serves as an early gauge of current conditions and business expectations over the next six months.

Aa3 retained: Moody’s gives France breathing space

Deutsche Bank analysts point to a reprieve for France at the end of last week. The sovereign, they note, “got a boost on Friday night as Moody’s defied market expectations and maintained their Aa3 rating (negative outlook).” In their view, the decision helped calm markets following recent volatility in French assets. Investors nevertheless remain alert to the possibility of future rating action, given the negative outlook.

Weaker oil prices are putting pressure on the commodity-linked Canadian Dollar (CAD), allowing EUR/CAD to retain its gains. The decline in crude followed US President Donald Trump’s decision to rule out immediate military action against Iran. According to Al Jazeera, he stated, “there will not be a strike today,” after earlier suggesting that Washington might have to “finish the job” or potentially secure an agreement with Tehran. Those earlier remarks came amid mounting Iranian and Houthi threats to American interests in the region.

2.25% hold: Rabobank’s call for October BoC meeting

For the October 28 meeting, Rabobank strategists say they “expect the Bank of Canada to hold the overnight policy rate at 2.25% at the October 28 meeting,” reflecting their view that the BoC will leave policy unchanged despite market pressure for additional tightening.