Euro gains against Canada Dollar following improved PMI data

• EUR/CAD remains stronger as German and Eurozone PMI data support the Euro.
• The Eurozone Composite PMI rose to 52.0 in July, signaling a rebound into economic expansion.
• Oil prices weigh on the Canadian Dollar despite minor Red Sea supply rebounds.

EUR/CAD continues its winning streak that started on July 24, trading around 1.6240 during the European hours on Wednesday. The currency cross rises as the Euro (EUR) receives support following the release of HCOB Purchasing Managers’ Index (PMI) data from Germany and the Eurozone.

The HCOB Eurozone Composite PMI rebounded into expansion territory in July, rising to 52.0 from June's neutral 50.0 mark. This signals the first increase in regional business activity since March and the sharpest rate of growth in eight months. Driving this turnaround, the Eurozone Services PMI advanced from 49.4 in June to 51.7 in July, snapping a three-month streak of decline with its fastest growth rate since February.

Germany's Composite PMI also returned to growth for the first time since March, rising to 51.3 in July from 49.5 in June. Meanwhile, Germany's Services PMI edged up to 49.8 from 48.6, remaining just below the neutral 50.0 threshold. Though still slightly contracting, this represents the mildest decline in German service sector activity since the downturn began in April.

Services PMIs highlight divergent Eurozone momentum amid Middle East tensions

Analysts at Rabobank note that the latest round of global services PMI releases underscores a widening divergence within the Eurozone. They point out that “we have the final print for global services PMIs,” with the Italian reading at “52.5” and the Spanish index at “58.3,” both of which “beat consensus expectations – the latter by a wide margin even.” Rabobank contrasts this resilience with “the preliminary estimates for France and Germany, which both came in below the 50-mark,” signalling ongoing weakness in those core economies. The bank also cautions that “the final prints will probably have deteriorated somewhat further, since the situation in the Middle East worsened throughout the survey period for July,” suggesting that geopolitical tensions may have exerted additional downward pressure on sentiment as the month progressed.

The EUR/CAD cross gains ground as the commodity-linked Canadian Dollar (CAD) struggles against falling energy markets, with oil prices trading near three-week lows. West Texas Intermediate (WTI) oil price rebounded slightly to around $75.40 per barrel at the time of writing, attempting to recover following sharp losses of nearly 13% over the previous two consecutive sessions.

Crude oil prices received a modest boost after Yemen's Houthis claimed responsibility for an attack on a Saudi vessel in the Red Sea. However, despite this temporary bump, investors are growing increasingly optimistic that a deal to reopen the Strait of Hormuz could soon be reached.

Axios reported that the United States (US), Iran, and Oman are nearing an interim agreement to reopen the Strait of Hormuz, with US officials aiming for an official announcement on Wednesday. The proposed framework establishes a 60-day temporary arrangement between Oman and Iran across the vital maritime chokepoint, which handles nearly 20% of the world's energy supply, with options for further extension.

Oil market weighs fragile Strait of Hormuz truce

Rabobank cautions that, despite the apparent progress toward a temporary arrangement to reopen the Strait of Hormuz, the outlook remains highly uncertain. The bank argues that “even if this deal isn’t immediately sunk by a drone or missile strike, there is a long and risky road ahead,” noting that negotiations are “currently clearly focused on preventing new escalation” rather than resolving the underlying disputes. In its view, the proposed 60‑day framework “does not offer permanent solutions for the key sticking points,” leaving the market exposed to renewed setbacks if tensions flare again.