Euro remains stronger against Canadian Dollar as German Industrial output beats forecasts

  • German Industrial Production rose 0.2% MoM in June, slightly beating market forecasts of 0.1%.
  • ECB rate expectations remain capped at one more hike this year, with a 40% chance of a second.
  • Upside for EUR/CAD may be limited as rising oil prices offer key support to the Canadian Dollar.

EUR/CAD gains ground after two days of losses, trading around 1.6160 during the European hours on Friday. The currency cross maintains its strength as the Euro (EUR) holds its ground following the latest data release from Destatis.

German Industrial Production rose by 0.2% month-on-month in June, beating market expectations of a 0.1% estimate. However, this pace marked a slowdown from May's reading, which was revised down to 0.7% from an initial 0.9%. On a year-on-year basis, calendar- and seasonally-adjusted industrial output fell by 0.1% in June after holding flat in May.

The European Central Bank (ECB) decided to keep interest rates unchanged in its recent meeting. Market pricing currently reflects expectations for only one additional ECB rate hike before the end of the year, alongside a roughly 40% probability of a second increase.

Oil and gas gains test tight bund ranges amid Iran deal uncertainty

Analysts at Commerzbank observe that “the tight German Bund ranges are being put to the test” as oil and gas prices edge higher “on the back of initial details about the Iran-Oman deal.” They add that, despite these developments, “a direct deal between the US and Iran is yet to be concluded,” leaving markets to grapple with rising energy benchmarks against a still-unresolved geopolitical backdrop.

Meanwhile, further upside for the EUR/CAD cross may be capped as the commodity-linked Canadian Dollar (CAD) draws support from a rebound in energy markets. West Texas Intermediate (WTI) oil price holds steady around $77.00 per barrel after surging over 4% in the previous day.

Crude prices face potential upward pressure from intensifying supply risks, driven by growing doubts regarding the reopening of the strategic Strait of Hormuz. Adding to geopolitical tensions, The Guardian reported that Saudi Arabia plans to extend military operations against Iran-aligned Houthis in support of Yemen's recognized government following attacks on Saudi Arabia's southern Najran province. Concurrently, Iran's parliament is considering a draft proposal to ban US and Israeli vessels, impose a 20% cargo penalty on hostile nations, and restrict the maritime corridor until the US blockade is lifted.

Markets turn cautious as Iran-Oman Strait of Hormuz deal emerges

Analysts at Deutsche Bank note that “markets have edged a bit more nervously into the end of the week over the last 24 hours” as investors digested “preliminary details on the finalized Iran-Oman deal to reopen the Strait of Hormuz.” They highlight that the evolving agreement has introduced a more cautious tone across trading conditions, with participants increasingly focused on the geopolitical and transit implications of the deal as it moves toward implementation.

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