EUR/CAD is currently around 1.6160 as European trading begins on Monday, showing only minor changes after a day of small gains. The trading week is expected to be quieter leading up to the Christmas holiday. The European Central Bank has kept its key policy rate steady at 2.0% since June. President Christine Lagarde mentioned that monetary policy remains stable and rates may stay the same for a long time.

The Canadian Dollar Outlook

The Canadian Dollar may gain strength if oil prices rise, as Canada is the largest oil exporter to the US. West Texas Intermediate Oil is trading at about $57.00 per barrel, influenced by potential supply issues stemming from tensions between the US and Venezuela. Attention also turns to Eastern Europe, where Ukraine targeted a Russian tanker in the Mediterranean Sea. While US and Ukrainian officials had constructive talks in Miami, no solutions were found. A heat map illustrates the Euro’s percentage changes against other major currencies. The Euro is performing well against the US Dollar, with other variations shown against currencies like GBP, JPY, and CAD. This map quickly highlights the day’s currency performance. With EUR/CAD near a multi-year high of 1.6160, it’s important to be cautious. Markets can be erratic during the holidays, leading to sharp, unexpected moves. Low trading volumes typical for late December mean even small trades can significantly affect prices. This creates a higher risk of slippage on entry and exit points.

European Central Bank Policy Stability

The European Central Bank’s steady 2.0% policy rate offers a reliable backdrop for the Euro, contrasting sharply with the aggressive rate hikes of 2023. This stability positions the Euro well against other central banks that are still adjusting their policies. However, we need to stay alert for any guidance in early 2026 that could indicate a policy shift. The Canadian dollar’s weakness is linked to the low price of WTI crude oil, currently struggling around $57 per barrel. This price is significantly below the average of about $78 observed throughout 2023, which is putting pressure on the Canadian economy. This low oil price is a major reason why the EUR/CAD exchange rate remains high. Geopolitical tensions in Eastern Europe and Venezuela are supporting oil prices, preventing them from falling further. These supply-side risks mean oil prices could suddenly spike if tensions escalate. Therefore, it’s wise to consider using options to hedge against a sudden reversal in EUR/CAD if oil prices unexpectedly increase. Given the high valuation of the pair, buying put options on EUR/CAD could be a smart way to guard against a potential drop. The usually lower implied volatility during the holiday season may make option premiums cheaper. This allows for a defined-risk position in case market sentiment shifts and the Canadian dollar begins to strengthen in the new year. Recent data shows the Euro is generally strong, especially against the US dollar. This indicates that the current EUR/CAD level is not solely due to weakness in the Canadian dollar but also reflects a strong Euro. We should keep an eye on the flows into the Euro itself, as any changes in its attractiveness could lead to a correction in this pair. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now