The Canadian dollar weakens as oil demand concerns rise, pushing EUR/CAD towards 1.6200

    by VT Markets
    /
    Jan 8, 2026
    The EUR/CAD exchange rate has increased, getting close to 1.6200. This rise is due to a weakening Canadian Dollar caused by worries about oil demand. Concerns about the US restoring Venezuelan oil imports have also affected the competitiveness of Canadian oil. Canada’s Prime Minister will visit China soon, amid uncertainties in US trade policy. We’ll also keep an eye on Germany’s Factory Orders and economic data from the Eurozone, where HICP inflation rose by 0.2% this month.

    Canadian Economic Indicators

    In December 2025, Canada’s Ivey PMI rose to 51.9 from 48.4 in November, indicating a return to growth after a contraction. We are expecting Canada’s Trade Balance data, followed by labor market figures on Friday. The Euro had mixed results against major currencies, with the Australian Dollar being the weakest against it. On Thursday, EUR/USD was around 1.1700, while GBP/USD decreased. A cautious outlook for various assets indicates that market conditions are sensitive. Details on the performance of major currencies against one another were provided, showing specific percentage changes and their implications. This information helps us understand the overall dynamics of the currency market. The EUR/CAD is moving towards 1.6200 due to concerns about Canadian oil demand. The discount on Western Canadian Select (WCS) crude compared to WTI is sensitive to news about competing supplies, especially when pipeline capacity is limited. The possibility of Venezuelan oil returning to the market poses a significant challenge for the Canadian Dollar.

    Key Economic Events

    The Prime Minister’s trip to China next week is a crucial event that could change the current situation. We should monitor implied volatility on CAD options, as a successful trade deal could quickly bolster the loonie. Until then, the EUR/CAD is likely to continue rising, especially with Canadian job data coming out on Friday. On the other hand, the Euro’s strength is being challenged by slowing inflation. Current Eurozone inflation is at 2.4% as of late 2025, a notable decrease from previous highs, and Germany’s economy is facing slow growth. This economic sluggishness could limit the Euro’s ability to rise significantly. In the coming weeks, consider buying EUR/CAD call options with strike prices above 1.6200 to take advantage of the current momentum while keeping your risks defined. These trades could be profitable if the EUR/CAD continues to rise before we receive news from China. Be ready to assess your positions around January 17th, as positive updates from Beijing could lead to a quick shift. Reflecting on the volatility in the energy market during the early 2020s, we see that geopolitical events can lead to significant changes in commodity-linked currencies. The current situation with Venezuela and Canadian trade policy seems similar, suggesting that the uptrend in EUR/CAD may have staying power. It’s important to keep a close watch on oil futures and Canadian economic data for signs of change. Create your live VT Markets account and start trading now.

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