EUR/CAD fell for a sixth straight day and traded near 1.6040 in European hours on Wednesday. The pair stayed weak as the Canadian Dollar drew support from improved risk appetite after US President Donald Trump extended the ceasefire, despite the collapse of second-round US–Iran talks.
The Canadian Dollar also gained support from firmer oil prices after new attacks on shipping near Iran. Maritime authorities said a Liberia-flagged container vessel was fired on by a gunboat linked to Iran’s Islamic Revolutionary Guard Corps, and two other outbound cargo ships were also targeted.
A Bloomberg report, citing the IRGC-linked Tasnim News Agency, said Iran has received “some sign” the United States may be willing to ease its naval blockade. Higher energy prices can raise foreign exchange inflows into Canada, as it is the largest crude exporter to the United States, and could add to inflation that may affect Bank of Canada messaging.
ECB President Christine Lagarde said the Eurozone outlook is highly uncertain due to an energy supply shock linked to Middle East tensions and the Strait of Hormuz blockade. She said energy prices have not reached worst-case levels, but conditions remain fragile.
We recall the clear bearish signal for EUR/CAD that emerged back in 2025 when the pair was trading above 1.60. That period of Middle East tension directly boosted the Canadian dollar through higher oil prices, setting a long-term trend in motion. As of today, with EUR/CAD trading near 1.4850, that fundamental divergence between the two economies remains highly relevant.
Elevated energy prices continue to be a key factor, with Western Canadian Select crude holding steady around $72 per barrel. This provides a strong underlying bid for the Canadian dollar by improving the nation’s terms of trade. Consequently, we see the Bank of Canada holding its policy rate at 5.0%, showing little urgency to cut as March inflation was still firm at 2.9%.
In contrast, the Eurozone is still dealing with the after-effects of the energy shock we saw unfold last year. The European Central Bank’s caution is reflected in its main rate, which sits a full percentage point lower at 4.0%. This rate differential makes holding Canadian dollars more attractive than euros, a factor that continues to pressure the cross.
For the coming weeks, traders should consider strategies that benefit from either a continued downtrend or low volatility in EUR/CAD. Buying put options offers a defined-risk way to position for further Canadian dollar strength against the euro. This strategy could be particularly effective if we see another flare-up in geopolitical risk that pushes oil prices higher.
However, we should also be prepared for a potential consolidation, as the pair has already fallen significantly since 2025. Selling short-dated strangles could be a way to collect premium if the pair trades in a range, especially if signs of diplomatic progress in the Middle East emerge. This would cap the upside in energy prices and temporarily slow the Canadian dollar’s advance.
