Canadian Dollar Forecast - February 2026

The Canadian dollar’s performance through January reflected a firmer yet selective tone as markets reassessed interest-rate expectations and commodity support strengthened. CAD held relatively steady against the U.S. dollar and showed improved resilience versus several Asia-Pacific currencies, supported by rising oil prices, a neutral Bank of Canada stance, and softer US dollar momentum. A steadier global risk environment also helped contain volatility.

That said, gains were uneven. The loonie lagged against parts of Europe and select emerging-market currencies, where growth differentials and shifting expectations for rate cuts drove cross-currency flows. Overall, January underscored a Canadian dollar that remained well supported but range-constrained, with near-term direction shaped more by global monetary policy signals, energy markets, and risk sentiment than by domestic data alone.

The quarterly outlook points to a broadly range-bound Canadian dollar through early 2026, with selective strength against Asia-Pacific and emerging-market currencies offset by modest softness versus Europe. USD/CAD is expected to stabilize around the mid-1.30s as narrowing rate differentials, steady oil prices, and a cautious Bank of Canada stance balance lingering U.S. policy and political uncertainty.

Against the euro and pound, CAD is projected to remain under mild pressure in the near term before levelling out later in the quarter, reflecting relatively slower growth momentum and evolving rate-cut expectations abroad. By contrast, the loonie is expected to trend firmer versus the yen, Swiss franc, and select emerging-market currencies, supported by carry dynamics, improving risk sentiment, and Canada’s ongoing commodity exposure. Overall, the outlook suggests a resilient but range-driven Canadian dollar, with cross-currency performance increasingly dictated by global growth divergence and policy timing rather than domestic catalysts.

February’s calendar is heavily focused on labour markets, inflation, and central-bank communication, with several high-impact releases likely to influence near-term CAD volatility. Early-month US labour data, including ADP employment and nonfarm payrolls, will help shape USD momentum and broader risk sentiment, while Canada’s employment change and unemployment rate offer a key read on domestic labour conditions.

Attention then turns to guidance from Bank of Canada Governor Macklem, alongside critical inflation and housing indicators such as US CPI, Canadian building permits, Canada’s inflation rate, and housing starts. As the month progresses, a dense US data slate, including retail sales, FOMC minutes, durable goods orders, core PCE inflation, and GDP, will be complemented by Canadian trade balance, retail sales, and GDP figures, helping shape Canadian dollar expectations heading into March.

The early-2026 policy calendar features a concentrated run of major central-bank decisions with the potential to drive FX volatility through late Q1. Focus initially turns to Europe, where policy decisions from the European Central Bank and the Bank of England will provide updated insight into inflation progress, growth risks, and the timing of any easing.