Euro remains weaker against Canadian Dollar following German PMI data

• EUR/CAD holds losses as Germany's flash HCOB Composite PMI eased to 51.0 in August amid a weaker services sector.
• Escalating US-Iran geopolitical tensions have driven crude oil higher, boosting Canada's energy exports and lifting the commodity-linked CAD.
• US Treasury Secretary Scott Bessent stated that maximum economic pressure reduces the likelihood of a large-scale military escalation against Iran.

EUR/CAD extends its losses for the second successive day, trading around 1.6100 during the European hours on Friday. The currency cross depreciates as the Euro (EUR) holds losses following the release of HCOB Purchasing Managers’ Index (PMI) data from Germany. Eurozone PMI figures will be eyed later in the day.

Germany's flash HCOB Composite PMI pulled back to 51.0 in August from 51.3 expected, weighed down by a sharper contraction in the services sector. The Services PMI fell deeper into contraction territory at 48.5, dropping from 49.8 previously and missing the 50.1 estimate. Conversely, the manufacturing sector provided a bright spot. The Manufacturing PMI surged to 54.1 in August, climbing from 52.2 previously and beating the market forecast of 52.0.

The EUR/CAD cross loses ground as the commodity-linked Canadian Dollar (CAD) receives support from rising crude oil prices. Oil prices have surged due to escalating tensions between the United States (US) and Iran, which remain locked in a standoff over control of the crucial Strait of Hormuz. In response, Washington is moving to severely restrict Iran's economy in an initiative President Donald Trump labeled an "economic D-day," with formal details expected on Monday.

The US proposed measures aim to sever Tehran's access to global commercial and financial networks, targeting banks, businesses, shipping registries, cash transfers, and smuggling operations, in an effort to force the regime into negotiations regarding its nuclear program, regional conflicts, and the passage through Hormuz.

According to a CNBC report, US Treasury Secretary Scott Bessent noted that the administration's campaign to dismantle Iran's economic lifelines will likely eliminate the need for significant military intervention. Bessent stated that applying maximum economic pressure makes a large-scale kinetic escalation far less probable.

Oil edges higher as Middle East tensions persist

Analysts at Nordea point out that geopolitical risks remain elevated, noting that "the Strait of Hormuz remains largely closed, peace in the Middle East still seems distant, and oil prices have crept higher again." They highlight that the combination of restricted shipping lanes and the lack of a clear path to de-escalation is keeping upward pressure on energy markets.