EUR/CAD traded near 1.6200 in Asian hours on Monday after trimming earlier losses, but remained lower. The Euro weakened as risk aversion rose after US–Iran talks ended without a deal.
US Vice President JD Vance said discussions in Islamabad finished after 21 hours with no agreement. President Donald Trump said a blockade on ships entering and leaving Iranian ports will start on April 13 at 10:00 AM ET (14:00 GMT).
Eurozone annual inflation rose to 2.5% in March, the highest since January 2025, and above the ECB’s 2% target. ECB President Christine Lagarde said policy will stay restrictive until inflation returns to target on a lasting basis.
Nordea projected four 25-basis-point rate rises starting in June. The note said wider price pressures remain even if the conflict ends.
The Canadian Dollar may gain support from higher oil prices, as Canada is the largest crude exporter to the US. WTI was over 7% higher, near $96.90 per barrel.
Oil rose amid renewed US–Iran tensions and concerns about a possible Strait of Hormuz blockade. The CAD is also linked to Bank of Canada rates, inflation, trade balance, market mood, and US economic conditions.
The breakdown of US-Iran talks is creating a classic risk-off mood in the markets, which is weighing on the Euro. With a US blockade of Iranian ports beginning today, we should anticipate continued uncertainty driving investors away from currencies like the EUR. This situation presents a clear signal for caution regarding any long Euro positions.
The Euro is also dealing with internal pressures, as March inflation hit 2.5%, remaining stubbornly above the European Central Bank’s target. We saw a similar dynamic in early 2022, when geopolitical stress in Europe caused the Euro to fall even as inflationary pressures were building towards future rate hikes. The current geopolitical fear is likely to overshadow the ECB’s hawkish stance for now.
On the other side of the trade, the Canadian Dollar is getting a major boost from the surge in oil prices, with WTI crude now trading near $97 a barrel. With Canada exporting over 4 million barrels of oil per day, mostly to the US, these higher prices will directly strengthen its trade balance and support the currency. This makes the CAD one of the more attractive currencies in the current environment.
This clear divergence between a struggling Euro and a commodity-backed Canadian Dollar suggests a bearish outlook for the EUR/CAD pair. We believe that buying put options on EUR/CAD is a prudent strategy for the coming weeks. This approach allows traders to profit from a potential decline in the pair while defining and limiting their maximum risk.
We must also prepare for a spike in market volatility, as threats to oil supply through the Strait of Hormuz historically create sustained uncertainty. We saw this back in 2019 when similar tensions led to sharp, unpredictable moves in energy and currency markets. This elevated volatility will make options pricing more expensive but also reflects the significant opportunities and risks ahead.
