Euro Rises Against CAD on Falling Oil Prices and ECB Hike Expectations

The Euro has gained ground against the Canadian Dollar for the second consecutive day, trading around 1.6120 during European hours on Wednesday.

This upward momentum is attributed to declining oil prices, which have pressured the commodity-linked Canadian Dollar (CAD).

However, West Texas Intermediate crude may rebound after US military strikes against Iranian targets near the Strait of Hormuz, as President Donald Trump stated these attacks were in direct retaliation for Tehran’s attempts to place sea mines in the vital waterway and for a previous attack on an American military base.

The Euro (EUR) also received a boost from hot Eurozone inflation data for August, which heightened expectations of an interest rate hike by the European Central Bank this month. Commerzbank argued that the renewed surge in the inflation rate above 3% will likely force the ECB to raise rates in September.

Analysts at ING observe that the recent surge in energy prices is feeding directly into policy expectations, noting that 'higher energy prices continue to drag ECB tightening expectations higher, with currently another 80bp of tightening priced by next summer.'