Euro advances against Canadian Dollar as Eurozone Investor Confidence rises in August

• EUR/CAD holds ground as Eurozone’s Sentix Investor Confidence rises in August for the first time in five months.
• Higher oil prices could lend support to the commodity-linked Canadian Dollar.
• Crude oil prices rebound due to uncertainty over reopening the Strait of Hormuz.

EUR/CAD inches higher after three days of losses, trading around 1.6120 during the European hours on Monday. The currency cross is holding its ground, driven primarily by a resilient Euro (EUR) following positive Eurozone economic sentiment.

The Eurozone's Sentix Investor Confidence data, a key indicator of investor morale, rose to 0.9 in August, marking its first positive reading in five months. Investor sentiment had previously dropped into negative territory in March with the onset of the Middle East conflict, though it showed signs of recovery by reaching -3.1 in July.

The upside potential for the EUR/CAD pair could be restrained by support for the commodity-linked Canadian Dollar (CAD) amid higher oil prices. West Texas Intermediate remains in the positive territory and is trading around $77.20 per barrel at the time of writing.

Crude oil prices rebounded as persistent uncertainty surrounds efforts to reopen the critical Strait of Hormuz. Over the weekend, Iran stated that talks with Oman to establish a safe shipping route through the strategic waterway are nearing an agreement, though Tehran cautioned that any deal would not result in an immediate reopening.

Meanwhile, regional security remains fragile; Iran-backed Houthi militants in Yemen claimed a recent attack on Saudi Arabia’s Jazan refinery, and a tanker operated by the Abu Dhabi National Oil Co. came under attack in the Strait.

Oil volatility keeps Middle East risks in focus for credit markets

HSBC Asset Management observes that a “recent pick-up in oil price volatility has kept the Middle East conflict front of mind for markets,” noting that while crude remains “the most visible channel,” the implications run deeper for corporate borrowers. The bank stresses that for credit investors “a big question” is not just the headline move in energy prices, but “how and where the disruption could lead to supply shortages across industries and supply chains,” particularly in sectors reliant on petrochemicals, fertilisers and industrial gases.