EUR/CAD has risen for three days straight, reaching about 1.6200 during European trading hours. This increase occurs in a cautious market environment, marked by a weaker US Dollar due to tensions between the US and Greenland. The Euro may have limited room for growth as the Eurozone Harmonized Index of Consumer Prices (HICP) shows a decrease, suggesting the European Central Bank (ECB) could keep interest rates steady for a while. In December 2025, HICP inflation slowed to 1.9%, down from 2.1% in November, marking the first reading below 2% since May. Core inflation also fell to 2.3%, the lowest level in four months.

Impact Of Oil Prices On CAD

EUR/CAD may keep rising as the Canadian Dollar struggles with falling oil prices, which affect Canada, the top crude supplier to the US. West Texas Intermediate (WTI) crude is currently at around $58.80 per barrel, influenced by US-EU tensions that are impacting global demand. Canada’s inflation rate rose to 2.4% in December 2025, exceeding market expectations and the Bank of Canada’s (BoC) forecasts, which adds uncertainty to policy direction. Tariffs are import taxes aimed at protecting local industries, and they can be controversial. Donald Trump plans to impose tariffs on Mexico, China, and Canada to support US producers and lower personal income taxes through this revenue. The EUR/CAD exchange rate is approaching 1.6200, driven more by weaknesses in the Canadian Dollar than by any real strength in the Euro. The focus in the coming weeks should be on the political risks to the CAD from potential US tariffs, suggesting that there could be further underperformance for the CAD.

European Central Bank’s Rate Decision

We see the Euro’s recent strength as temporary, mainly in response to a weaker US Dollar. With Eurozone inflation dropping to 1.9% in December 2025, the ECB has a clear opportunity to keep rates steady for an extended time. This situation limits the Euro’s potential for growth, making it less active in this pair’s movements. Despite the uptick in Canadian inflation to 2.4% in December 2025, we don’t anticipate a strong reaction from the Bank of Canada (BoC). Recent comments from BoC officials indicate they will focus on the significant economic threats posed by trade uncertainty rather than temporary price increases, which could limit any support for the CAD from the inflation figures. Furthermore, the Canadian Dollar faces pressure from declining oil prices, with WTI recently falling below $58 to around $57.50 per barrel. Since crude oil is Canada’s largest export to the US, lower energy prices directly reduce the CAD’s value. This trend is expected to persist as trade tensions affect global demand. The critical factor remains the US tariff plan, as Washington has reportedly begun a 30-day review for tariffs on Canadian auto parts and aluminum. Looking back to 2018-2019, similar trade threats led to significant CAD depreciation. Therefore, utilizing derivatives like call options to gain exposure to potential EUR/CAD gains could be a strategic approach, allowing for profit while managing risk in a volatile political climate. Create your live VT Markets account and start trading now.

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