Euro falls against Canadian Dollar as US-Iran tensions heighten oil supply concerns

• EUR/CAD drops as higher oil prices strain Eurozone economies and rekindle inflation fears.
• The commodity-linked Canadian Dollar gains as WTI price extends higher for a second consecutive day.
• Iran ruled out negotiating with President Trump, stating talks will remain frozen until his term ends in 2029.

EUR/CAD continues its losing streak for the fifth consecutive day, trading around 1.6080 during the European hours on Tuesday. The Euro (EUR) is under pressure as rising risk aversion, driven by escalating US-Iran tensions, weighs on the cross. Intensifying conflict in the Middle East has heightened fears of oil supply disruptions, adding strain to energy-dependent Eurozone economies and rekindling inflation concerns.

ECB hike odds edge higher as hawkish repricing gathers pace

Deutsche Bank’s Early Morning Reid highlights that the hawkish repricing has been particularly pronounced in Europe, with analysts noting that “at the ECB, a September hike was back up to a 90% chance, up from 85% last Friday.” This shift underscores how quickly market expectations have firmed as inflation concerns resurface.

The EUR/CAD cross depreciates as the commodity-linked Canadian Dollar (CAD) continues to gain support from higher oil prices. West Texas Intermediate (WTI) oil price remains stronger for the second successive day, trading around $83.30 per barrel at the time of writing.

Crude oil prices advance. Iran has explicitly ruled out any future negotiations with US President Donald Trump. Citing Iranian news outlets and a post on X by Majid Shakeri, an adviser to Parliament Speaker Mohammad Bagher Ghalibaf, reports indicate that Tehran intends to wait until the current US presidential term ends on January 20, 2029, before considering a return to the bargaining table. "Trump will not reach an agreement with us. We will accompany him until his term ends," Shakeri stated.

Canadian recovery seen as fragile as US tariff threat looms

Analysts at Commerzbank observe that “it almost seems as if the Canadian real economy is slowly recovering from the problems in its relationship with the US,” pointing to signs of improvement in activity. However, they caution that “this recovery is on shaky ground,” with the backdrop darkened by trade risks. Commerzbank notes that the US president “has announced new tariffs of 50% on certain Canadian goods if no agreement is reached by August 19th,” a threat that could quickly undermine the recent progress in Canada’s real economy.