The EUR/CAD currency pair depreciated for the second consecutive day, trading around 1.5960 during European hours on Tuesday, as the Euro's losses outpaced those of the Canadian Dollar. The Euro struggled due to increased safe-haven demand stemming from stalled US-Iran peace talks and ongoing Middle East conflict, which has heightened economic uncertainty in the region [1].
Market participants expect the European Central Bank (ECB) to keep its benchmark deposit rate unchanged at 2.0% during Thursday's meeting, a level maintained since June of the previous year. ECB policymakers are anticipated to adopt a wait-and-see approach, with ECB official Martins Kazaks stating, “we still have the luxury of collecting data and forming our view” [1].
The Canadian Dollar's downside was limited by similar risk aversion pressures, but it may regain ground if oil prices continue to rise. West Texas Intermediate (WTI) crude oil prices increased by over 2% on Tuesday, trading around $96.90 per barrel, as the closure of the Strait of Hormuz tightened Middle East energy supplies. US President Donald Trump appears unlikely to accept Iran's offer to end the closure, and US Secretary of State Marco Rubio has ruled out any deal that excludes Iran’s nuclear program [1].
The Bank of Canada (BoC) is widely expected to hold its policy rate steady at 2.25% on Wednesday, though markets remain divided on whether the central bank will signal a potential rate hike or an extended pause for the remainder of the year [1].
CONCLUSION
EUR/CAD remains under pressure as the Euro faces headwinds from geopolitical uncertainty and safe-haven flows, while the Canadian Dollar is supported by rising oil prices. Both the ECB and BoC are expected to keep rates unchanged in their upcoming meetings, leaving markets focused on forward guidance and geopolitical developments for further direction.