EUR/CAD Rises To Near 1.6100 Due To Hawkish ECB Tone

• EUR/CAD advances as the Euro strengthens on a hawkish ECB stance.

• ECB’s Lagarde reiterated that policy will stay restrictive until inflation durably returns to the 2% target.

• The commodity-linked CAD weakens as WTI crude oil erases its intraday gains.

EUR/CAD gains ground as the Euro (EUR) receives support from the hawkish tone of the European Central Bank (ECB). The currency cross is trading around 1.6100 during the European hours on Tuesday. European Central Bank (ECB) President Christine Lagarde stressed that monetary policy will remain restrictive until inflation returns sustainably to the 2% target.

Germany’s S&P Global and HCOB Composite Purchasing Managers’ Index (PMI) slipped to a three-month low of 51.9 in March from 53.2 in February, with the slowdown driven entirely by the services sector. The Services PMI fell to 50.9 in March from 53.5 previously.

Phil Smith, Economics Associate Director at S&P Global Market Intelligence, stated that the Middle East conflict has dampened growth in the services sector. Smith noted that higher fuel prices and elevated uncertainty have weighed on spending, causing business activity growth to slow sharply to its weakest level in seven months in March.

Market participants will look for further direction from upcoming Eurozone Retail Sales and German inflation data later this week, which could provide additional insight into the ECB’s interest rate outlook for the year.

The EUR/CAD cross receives support as the commodity-linked Canadian Dollar (CAD) struggles, as the WTI price has lost its daily gains. It is worth noting that Canada is the largest crude oil exporter to the United States (US). West Texas Intermediate (WTI) oil price trades around $103.00 per barrel at the time of writing.

Traders prepared for US President Donald Trump’s approaching deadline for Iran to reopen the Strait of Hormuz. Trump had earlier warned that he could strike Iranian power plants and bridges if his demands are not fulfilled by 8:00 PM Eastern Time on Tuesday.