EUR/CAD rose to about 1.6100 during European trading on Tuesday, supported by the Euro after a hawkish tone from the European Central Bank. ECB President Christine Lagarde said policy will stay restrictive until inflation returns sustainably to the 2% target.
Germany’s S&P Global and HCOB Composite PMI fell to a three-month low of 51.9 in March from 53.2 in February, with weakness centred in services. The Services PMI dropped to 50.9 from 53.5.
Key Eurozone Data In Focus
Data later this week include Eurozone Retail Sales and German inflation figures, which may shape expectations for the ECB interest rate path this year. These releases are being watched for further direction on monetary policy.
The pair also found support as the Canadian Dollar weakened while oil gave up earlier gains. WTI was trading near $103.00 per barrel at the time of writing, and Canada is the largest crude oil exporter to the United States.
Traders also monitored geopolitical risk linked to the Strait of Hormuz. US President Donald Trump set an 8:00 PM Eastern Time deadline on Tuesday for Iran to reopen the route, after warning of possible strikes on Iranian power plants and bridges.
Looking back to 2025, we saw the EUR/CAD cross push towards 1.6100, largely driven by a European Central Bank that was firmly hawkish. That environment was also shaped by severe geopolitical tensions in the Middle East, which pushed WTI crude oil prices above $103 per barrel. The situation today could not be more different, suggesting a significant shift in strategy is needed.
How The Backdrop Has Shifted
The ECB’s tone has completely changed from the restrictive stance we observed last year. With Eurozone inflation falling to 2.4% in March 2026, markets are now confidently pricing in rate cuts beginning this summer, a stark contrast to the hawkish promises of 2025. This fundamental policy divergence between then and now suggests sustained weakness for the Euro.
The extreme geopolitical risk premium has also evaporated from the oil market. West Texas Intermediate crude is now trading at a more stable $86 per barrel, a far cry from the $103 levels seen during the Strait of Hormuz crisis in 2025. This price provides solid, non-volatile support for the commodity-linked Canadian Dollar.
Weakness in the German economy, which was a footnote to the hawkish ECB last year, is now a central factor confirming the bank’s dovish pivot. The latest German IFO Business Climate index, while ticking up slightly to 87.8, remains at levels that signal economic sluggishness. This provides little reason to expect any surprise Euro strength.
Given this reversal of fortunes, any strength in the EUR/CAD pair should be seen as a selling opportunity. Derivative traders could consider buying put options to position for a move lower, targeting levels well below the current 1.4850 trading area. The dynamic of a dovish ECB and a stable, oil-supported Canadian Dollar is the opposite of what we saw in 2025.
