EUR/CAD holds losses near 1.6200 as Canadian Dollar gains on risk-on mood

• EUR/CAD weakens as the Canadian Dollar gains support despite softer oil prices.
• Washington and Tehran are weighing an extension of their two-week ceasefire to gain more time for peace negotiations.
• Middle East de-escalation boosts risk appetite, while falling oil prices ease inflationary pressures in the Eurozone.

EUR/CAD remains subdued for the second successive day, trading around 1.6200 during the Asian hours on Thursday. The currency cross depreciates as the Canadian Dollar (CAD) receives support from easing Middle East conflict. However, the commodity-linked CAD may come under pressure from softer oil prices. It is worth noting that Canada is the largest crude exporter to the United States.

Reports indicated that Washington and Tehran are considering extending their two-week ceasefire to allow more time for peace negotiations, even as the Strait of Hormuz remains effectively closed under a dual blockade. However, Tehran may allow vessels to pass freely through the Omani side of the Strait if an agreement is reached to prevent a renewed escalation in hostilities.”

However, the Euro (EUR) also holds ground against its major peers amid improved market sentiment, driven by expectations of a potential de-escalation in the Middle East conflict. US President Donald Trump stated that the war was “close to over.” Reports, including those from Bloomberg, indicated speculation about a possible two-week extension of a ceasefire, although Trump dismissed the necessity of such a move, citing ongoing negotiations aimed at ending the conflict.

“Signs of de-escalation in the Middle East have boosted risk appetite, with declining oil prices helping to ease inflationary pressures in Eurozone. Policymakers at the European Central Bank (ECB) are inclined to keep interest rates unchanged at the April policy meeting. ECB President Christine Lagarde said this week that the central bank must remain “completely agile” on rates, while emphasizing that it does not hold a bias toward tightening. Nevertheless, traders continue to view rate hikes as unavoidable, pricing in two quarter-point increases this year.