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

The Euro (EUR) has made gains against the Canadian Dollar (CAD) as the European Central Bank (ECB) takes a hawkish stance and oil prices decline. The EUR/CAD currency pair has halted its six-day losing streak, trading around 1.6080 during European trading hours on Thursday. Market-based inflation expectations for the Euro Area over the next year sit at 2.4%, remaining above the ECB’s target of 2%.

Actual Eurozone inflation rose to 2.9% in July. Economic growth in the Eurozone has also been strong, with a 0.4% expansion in Q2, the strongest pace since early 2025. The Canadian Dollar faces pressure due to lower oil prices, as West Texas Intermediate (WTI) oil fell for the second day in a row, trading at $81.10 per barrel. Oil prices fell due to revised global demand forecasts for 2026, driven by disruptions from the US-Israeli war on Iran.

OPEC reduced its 2026 world oil demand growth projection to 580,000 barrels per day, while the International Energy Agency forecasted a 1.6 million bpd consumption contraction this year. However, supply risks may restrain oil price declines. US President Donald Trump stated that the US has control over the strategic waterway, and diplomatic talks remain stalled.

Meanwhile, the Trump administration is seeking to increase economic pressure on Iran through sanctions and a naval blockade to limit Iranian oil exports. Commerzbank’s Michael Pfister cautions against overestimating the impact of the Iran conflict on Canadian exports, noting that headline figures are not price-adjusted. Real energy exports reached their lowest point in August last year but have been steadily rising since March.

Gold rebounded toward $4,400 per troy ounce on Friday, reversing its previous day’s decline, as weak US Dollar sentiment and Middle East uncertainties weighed on the precious metal.