The EUR/CAD exchange rate rose, nearing 1.6200, driven by weakening in the Canadian Dollar linked to oil demand concerns. US efforts to restore Venezuelan oil imports sparked worries over increased supply, affecting Canadian oil’s competitiveness.
Canada’s Prime Minister plans to visit China amid US trade policy uncertainty. Germany’s Factory Orders and Eurozone economic data are set to be monitored, as Eurozone’s HICP inflation grew 0.2% monthly.
Canadian Economic Indicators
Canada’s Ivey PMI climbed to 51.9 in December 2025 from 48.4 in November, signalling return to expansion after contraction. Canada’s Trade Balance data is due, with labour market figures following on Friday.
The Euro showed varying percentage changes against major currencies, with the Australian Dollar emerging as the weakest against the Euro. On Thursday, EUR/USD held around 1.1700, while the GBP/USD moved lower. The technical outlook for various assets was assessed, indicating cautious market environments.
Data indicating the performance of major currencies against each other was detailed, outlining specific percentage change figures and their directional implications. These observations contributed to the broader assessment of the currency market dynamics.
We are seeing the EUR/CAD push towards 1.6200, driven by concerns over Canadian oil demand. This is happening as the discount on Western Canadian Select (WCS) crude compared to WTI has been sensitive to news of competing supply, a trend we’ve seen historically when pipeline capacity is tight. The potential return of Venezuelan oil to the market is a significant headwind for the Canadian Dollar.
Key Economic Events
The upcoming trip to China by the Prime Minister next week is a key event that could change this narrative. We should be watching implied volatility on CAD options, as a successful trade diversification deal could quickly strengthen the loonie. Until then, the path of least resistance for EUR/CAD appears to be upward, especially with Canadian jobs data coming on Friday.
On the other side of the pair, the Euro’s strength is being tested by slowing inflation, which we saw in the December 2025 data. Current Eurozone inflation sits at 2.4% as of late 2025, a significant drop from the highs seen a few years ago, and Germany’s economy has been struggling with near-zero growth. This economic sluggishness could limit how much further the Euro can climb on its own merits.
For the coming weeks, we can consider buying EUR/CAD call options with strike prices above 1.6200 to ride the current momentum with defined risk. These positions would allow us to profit if the pair continues its ascent before the China trip news hits the market. Be prepared to reassess positions around January 17th, as any positive headlines from Beijing could trigger a sharp reversal.
Looking back at the energy market volatility of the early 2020s, we know that geopolitical news can cause sustained shifts in commodity-linked currencies. The current situation with Venezuela and Canada’s trade policy feels similar, suggesting this upward trend in EUR/CAD could have momentum. We must monitor oil futures and Canadian economic data closely for signs of a turn.
