EUR/CAD extends upside above 1.6350 as Canadian PMI supports BoC rate cut bets

• EUR/CAD gains momentum to near 1.6360 in Thursday's early European session.
• Canadian Manufacturing PMI fell to 47.7 in September.  
• ECB's Lagarde said there are no significant threats to the euro-area inflation outlook but stressed the importance of remaining vigilant.

The EUR/CAD cross extends the rally to around 1.6360 during the early European session on Thursday. The Canadian Dollar (CAD) weakens against the Euro (EUR) as Canadian economic data showed a deeper downturn in the manufacturing sector.

Data released by S&P Global showed that Canada's S&P Global Manufacturing PMI declined to 47.7 in September from 48.3 in August, signaling a continued contraction in factory activity. This marked the eighth straight month of decline in the manufacturing sector, which dragged the CAD lower and created a tailwind for the pair. 

"Softer PMI data in Canada added to some expectations of another cut by the BoC," said Jayati Bharadwaj, a global FX strategist at TD Securities. 

The European Central Bank (ECB) President Christine Lagarde said there are no serious threats to the outlook for euro-area inflation but that officials must remain vigilant. Her remarks indicated that the ECB is in no rush to lower borrowing costs further. This, in turn, supports the shared currency against the CAD. 

Eurostat published the Eurozone Harmonized Index of Consumer Prices (HICP) report on Wednesday, with annual inflation rising to 2.2% in September, as expected, compared to a 2% increase in August. The core HICP climbed 2.3% YoY in the same period, as expected. Meanwhile, the Eurozone's HICP inflation steadied at 0.1% MoM, matching August's reading. Core HICP increased 0.1% MoM, versus 0.3% prior.