EUR\/CAD fell for a third day and traded near 1.5920 in Asian hours on Friday. The move came as the Euro weakened during risk-off trading linked to Middle East tensions.<\/p>\n
On Thursday, US President Donald Trump said he would keep a naval blockade of Iranian ports, amid concern that the Strait of Hormuz may not reopen soon. He also criticised congressional efforts to limit his war powers, including a Senate proposal rejected earlier the same day, according to Bloomberg.<\/p>\n
Iran\u2019s Supreme Leader Mojtaba Khamenei said Iran would not give up its nuclear or missile capabilities and indicated Tehran would keep control of the strait. These developments added to uncertainty around a US-Iran deal.<\/p>\n
The European Central Bank left rates unchanged at its April meeting on Thursday. It kept the deposit rate at 2% and said upside risks to inflation and downside risks to growth have increased.<\/p>\n
The Canadian Dollar found support from higher oil prices, which weighed on EUR\/CAD. WTI traded around $102.40 per barrel after opening with a bearish gap and remained in negative territory, while crude was on course for a second weekly gain.<\/p>\n
Looking back at the events of April 2025, we recall the high geopolitical tension surrounding the Strait of Hormuz, which pushed oil prices above $102 per barrel. Today, with the situation having stabilized over the past year, WTI crude is trading closer to $85, a level that still provides strong support for the Canadian dollar. This shift from crisis pricing to a sustained higher-price environment has changed the trading landscape for commodity-linked currencies.<\/p>\n
The European Central Bank, which was holding its rate at 2% in April 2025, was subsequently forced to hike several times to combat the resulting inflation. We now see the ECB deposit rate at 3.0%, with recent data showing Eurozone core inflation has moderated to 2.7%, suggesting the hiking cycle is likely over. This policy pause is creating headwinds for the Euro as other central banks maintain a more hawkish stance.<\/p>\n
In contrast, the Bank of Canada has kept pace, with its key interest rate currently at 3.5%, reflecting the relative strength of the commodity-driven Canadian economy. This 0.5% interest rate differential in favor of the CAD makes holding Canadian dollars more attractive than the Euro. This fundamental factor has been a primary driver of the EUR\/CAD exchange rate over the past twelve months.<\/p>\n
Given this context, we see the EUR\/CAD cross continuing its downward trend from the 1.59 levels seen during the 2025 tensions. With the pair currently trading near 1.4850, the path of least resistance appears to be lower as the interest rate advantage and favorable terms of trade support the CAD. We believe traders should position for further, albeit slower, declines in the pair.<\/p>\n
For the coming weeks, we should consider buying EUR\/CAD put options to capitalize on potential downside while defining our risk. With implied volatility lower than during last year’s Mideast crisis, option premiums are more reasonably priced. Establishing bear put spreads could be a cost-effective strategy to target a move toward the 1.4700 level.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" EUR\/CAD slips near 1.5920 as Middle East tensions trigger risk-off, weaker euro and stronger oil-backed Canadian dollar.<\/p>\n","protected":false},"author":38,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[46],"tags":[],"class_list":["post-46383","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":[],"aioseo_notices":[],"featured_image_src":null,"featured_image_src_square":null,"author_info":{"display_name":"josephine","author_link":"https:\/\/www.vtmarketsglobal.com\/en\/author\/josephine\/"},"_links":{"self":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/46383","targetHints":{"allow":["GET","POST","PUT","PATCH","DELETE"]}}],"collection":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/users\/38"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/comments?post=46383"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/46383\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/media?parent=46383"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/categories?post=46383"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/tags?post=46383"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}