EUR/CAD fell for a fourth session and traded near 1.5910 in European hours on Tuesday. Markets were waiting for the Eurozone preliminary Harmonised Index of Consumer Prices (HICP) figures for February, due later in the day. The pair weakened as the Canadian Dollar gained support from higher oil prices. Canada is a large crude exporter, so its currency often moves with oil.

Oil Prices Support The Canadian Dollar

West Texas Intermediate (WTI) rose towards $75.00 at the time of writing. Prices stayed firm on supply worries linked to the war in the Middle East. US military officials said on Tuesday they had destroyed command posts of Iran’s Revolutionary Guards, plus Iranian air defence and missile launch sites. They said this had happened since the start of the joint Israeli-US offensive on Saturday. Reuters reported a statement from Ebrahim Jabari, senior adviser to the IRGC commander-in-chief, saying: “The Strait of Hormuz is closed. If anyone tries to pass, the heroes of the Revolutionary Guards and the regular navy will set those ships ablaze.” The Canadian Dollar also found support as higher oil prices raised concerns about another rise in inflation in Canada. Higher energy costs can add pressure for interest rates to stay higher for longer.

Longer Term Divergence In Eur Cad

We recall seeing EUR/CAD fall toward 1.5900 back in early 2025, driven by concerns over Eurozone inflation and rising oil prices. Today, the pair trades significantly lower near 1.4850, as those initial trends have since accelerated and created a clear divergence. The fundamental pressures that began over a year ago are now firmly established in the market. The Canadian dollar’s strength is directly linked to stubbornly firm energy prices, a theme that started with the Middle East tensions in 2025. While the acute threats to the Strait of Hormuz have subsided, crude oil has found a new equilibrium, with WTI now consistently trading above $82 per barrel. This provides a constant tailwind for the Canadian economy and its currency. This has created a stark contrast in inflation data, which is key for central bank policy. The latest figures show Eurozone HICP has cooled to 2.1%, near the European Central Bank’s target, while Canada’s CPI remains elevated at 2.8% due to energy costs. This divergence makes it more likely the ECB will cut rates before the Bank of Canada, which must remain vigilant. For derivative traders, this reinforces the case for shorting EUR/CAD. Buying put options on the pair offers a clear way to profit from further downside while defining risk. We see traders targeting strikes below 1.4700 in the coming months, betting on the widening interest rate differential between the two central banks. The focus should now be on upcoming employment and inflation reports from both regions. Any sign of persistent wage growth in Canada will add to bets that the BoC will hold rates steady, further pressuring the EUR/CAD cross. Implied volatility in the options market is expected to pick up around the central bank meetings scheduled for April. Create your live VT Markets account and start trading now.

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