Euro gains against Canadian Dollar on upbeat German IFO Business Index

• EUR/CAD appreciates following stronger-than-expected German IFO sentiment data across all major indexes in September.
• Canadian Dollar resilience and uncertain oil markets may limit further upside for the EUR/CAD cross.
• Iran threatens to restrict Strait of Hormuz navigation amid ongoing U.S. sanctions, bolstering energy prices.

EUR/CAD gains ground after registering modest losses the previous day, trading around 1.6060 during European hours on Thursday. The Euro (EUR) is appreciating as markets react positively to better-than-expected economic sentiment data out of Germany.

Germany’s IFO - Business Climate Index for September rose faster than anticipated, climbing to 89.9 from August's reading of 88.8 and beating consensus forecasts of 89.0. Broader metrics followed the same upward trend: the Current Assessment Index reached 89.5, topping expectations of 89.0 and the prior 88.5 reading, while the Expectations Index, a key gauge for six-month outlooks, accelerated to 90.4 against an 89.3 consensus.

Despite the strength of the Euro, upside potential for the EUR/CAD currency pair may be limited as the commodity-linked Canadian Dollar (CAD) holds firm. CAD continues to find support amid cautious market sentiment and geopolitical tension driving crude oil prices. The ongoing uncertainty surrounding diplomatic talks between the United States and Iran remains a primary driver of stability for energy markets.

Iranian President Masoud Pezeshkian delivered a defiant address at the UN General Assembly. Pezeshkian declared that Tehran would not yield to external threats, insisting on Iran's right to pursue nuclear technology for economic development. He further emphasized that Iran would restrict freedom of navigation through the critical Strait of Hormuz for as long as US sanctions and maritime blockades remain enforced.

US diesel export ban debate keeps energy policy risk elevated

Analysts at Rabobank highlight growing uncertainty around US energy policy, noting that “US Energy Secretary Wright has stated a US diesel export ban won't work,” yet, according to reporting from Politico, “the White House is still preparing [a] plan for [a] 90-day ban.” The bank suggests this policy disconnect is adding to market nervousness around diesel supply and pricing, particularly for import-dependent regions.