Euro strengthens against Canadian Dollar despite mixed German data

• The Euro holds ground despite a 1.1% drop in German Retail Sales, boosted by stronger factory data.
• Eurozone and German PMIs rose to multi-month highs in July, showing improved manufacturing activity.
• Declining crude oil prices weigh on CAD as geopolitical tensions ease following US-Iran diplomatic talks.

EUR/CAD edges lower after opening with a bullish gap, remaining in the positive territory and trading around 1.6180 during the European hours on Monday. The currency cross is holding its ground as the Euro (EUR) remains resilient despite mixed economic data from Germany.

Germany’s consumer spending took an unexpected hit in June, with Retail Sales falling 1.1% month-on-month—steeper than the forecast 0.5% decline, following a revised 1.2% rise in May. On an annualized basis, German retail sales slipped 0.2%, dropping sharply from the revised 2.1% growth seen in the previous month.

Despite the weak retail figures, the Euro (EUR) found solid backing from upbeat industrial data. The S&P Global Germany Manufacturing PMI reached a four-month high of 52.2 in July, up from 50.3 in June, indicating a clear rebound in factory performance. This positive trend extended across the broader region, as the S&P Global Eurozone Manufacturing PMI edged up to 51.9 from 51.4 in June, marking the strongest overall improvement in factory operating conditions since April.

European equities gain as Brent retreat eases geopolitical nerves

Analysts at Deutsche Bank highlight that European equities outperformed as energy markets softened, noting that "European equities outperformed as Brent crude fell by -6.88% to $90.12/bbl in the absence of new material escalation between the US and Iran." They suggest that the sharp pullback in Brent helped create a more supportive backdrop for major European indices by tempering immediate geopolitical and commodity-related concerns.

Kocher flags geopolitical risks but keeps Euro policy data-dependent

FXS Speechtracker scores the speech at 5.6/10, below Kocher’s historic 6.3/10 average, pointing to a mildly softer tone versus past appearances. The emphasis on how fast geopolitical developments can alter energy prices and the inflation outlook highlights upside inflation risks, but the lack of explicit tightening language tempers the hawkish impact for the Euro.

Kocher’s pledge that the ECB Governing Council will decide in autumn based on incoming data to bring Euro area inflation back to 2% on a sustainable basis reinforces a cautious, data-dependent stance. Overall, the remarks lean slightly hawkish on inflation vigilance but fall short of a strong policy push, suggesting limited immediate support for the Euro unless data re-accelerate.

Meanwhile, the commodity-linked Canadian Dollar (CAD) faces headwind from falling crude oil prices, further supporting the EUR/CAD cross. Oil markets weakened following news that US President Donald Trump announced a pause on planned military strikes against Iran, significantly easing supply risk concerns. In a post on Truth Social, President Trump noted that Iran and its regional partners requested time to negotiate a deal focused on resolving nuclear concerns and fully reopening the Strait of Hormuz.