Euro Rises Against CAD as Investors Expect ECB Rate Hike

The Euro (EUR) has gained ground against the Canadian Dollar (CAD) as investors expect the European Central Bank (ECB) to raise interest rates at its September policy meeting on Thursday. The ECB's decision is driven by surging energy prices due to the ongoing US-Iran conflict, which has led to a 25-basis-point hike in the Rate on Deposit Facility.

Traders have fully priced in this rate increase as Eurozone inflation rose back above 3% in August. Carsten Brzeski, global head of macro at ING, said, 'We expect the ECB to hike rates by 25 basis points. Another insurance rate hike.'

The upside of the EUR/CAD cross may be restrained due to the commodity-linked CAD's potential support from elevated oil prices. Oil prices have climbed following a US strike on several Iranian tankers near Kharg Island, a major export hub.