Euro advances against Canadian Dollar amid ECB hawkish stance, lower oil prices

• EUR/CAD rises as strong Eurozone economic data supported the ECB's hawkish policy stance.
• July Eurozone inflation rose to 2.9%, keeping market-based one-year expectations at 2.4%, above the ECB's 2% target.
• Falling WTI prices pressured the Canadian Dollar following downgraded 2026 global oil demand forecasts.

EUR/CAD halts its six-day losing streak, trading around 1.6080 during the European hours on Thursday. The currency cross gains ground as the Euro (EUR) receives support as the macroeconomic picture in the Eurozone continues to support the European Central Bank's (ECB) hawkish stance.

Market-based inflation expectations for the Euro Area over the next year sit around 2.4%, remaining above the ECB’s official 2% target, while actual Eurozone inflation edged up to 2.9% in July. Coupled with a resilient economic outlook, highlighted by a 0.4% expansion in Q2, the strongest pace since early 2025, analysts have grown increasingly optimistic about the region's growth. Although near-term growth may moderate before regaining momentum, investors fully expect the ECB to deliver another 25-basis-point rate hike in September.

The EUR/CAD cross holds gains as the commodity-linked Canadian Dollar (CAD) faces challenges amid lower oil prices. West Texas Intermediate (WTI) oil price loses ground for the second successive day, trading around $81.10 per barrel at the time of writing.

Crude oil prices decline following downward revisions to global demand forecasts for 2026, driven by disruptions stemming from the US-Israeli war on Iran. In its monthly oil market report on Wednesday, OPEC reduced its 2026 world oil demand growth projection to 580,000 barrels per day. Meanwhile, the International Energy Agency further downgraded its outlook, forecasting a 1.6 million bpd contraction in consumption this year, a notable drop from its previous estimate of 1 million bpd.

However, the downside of the oil prices could be restrained due to rising supply risks after President Donald Trump stated that the US has "total control" over the strategic waterway amid heightened rhetoric between Washington and Tehran, while diplomatic talks remain stalled.

At the same time, the Trump administration is pushing to ramp up economic pressure on Iran as military actions have yet to bring the regime into compliance. Planned measures include broadening economic sanctions and implementing a naval blockade to restrict Iranian oil exports.

Canada’s energy export rebound seen as continuation rather than fresh Iran-driven surge

Commerzbank’s Michael Pfister cautions against overstating the impact of the Iran conflict on Canada’s recent export performance. He acknowledges that “US exports in particular have risen significantly since March – a trend that is almost certainly attributable to the conflict in Iran –” but stresses that these headline figures “are not price-adjusted.” In his view, the more meaningful story lies in the volume data: “In real terms, energy exports reached their lowest point in August last year and have been rising steadily ever since; the trend since March has been more of a continuation than an acceleration.” This suggests the improvement in Canada’s energy sector predates the latest geopolitical tensions and forms part of a broader, more sustainable upswing in the economy.