Canadian Dollar Forecast - January 2026

The Canadian dollar’s performance in December 2025 reflected a steadier, more contained tone as markets moved into year-end mode. CAD showed relative stability against the U.S. dollar and found pockets of strength against select Asia-Pacific currencies, supported by a Bank of Canada pause, firmer domestic data and oil prices holding in a supportive range. However, gains were limited, with the loonie lagging against some European and emerging-market currencies as shifting interest-rate expectations and divergent growth outlooks influenced cross-currency flows. Overall, December highlighted a Canadian dollar that remained broadly resilient but constrained, with momentum shaped more by global policy signals and risk sentiment than by domestic catalysts.

Looking ahead, forecasts for the coming month point to a largely stable but slightly softer near-term outlook for the Canadian dollar. USD/CAD is expected to drift modestly higher toward the 1.38 area, suggesting limited near-term pressure on the loonie as markets reassess interest-rate paths early in the year. Crosses against the euro and pound are projected to hold steady, indicating little change in relative policy dynamics with Europe and the UK At the same time, CAD is forecast to ease against the yen and Swiss franc, reflecting a cautious risk backdrop, while remaining broadly stable versus the yuan. Strength against the Mexican peso and only modest slippage against the Australian and New Zealand dollars underline an outlook of contained, orderly moves rather than a clear directional trend for CAD.

January 2026 features a data-heavy calendar that could set the tone for CAD and broader North American market sentiment early in the year. The month opens with key US labour indicators including ADP and JOLTS, followed by trade balance updates for both the US and Canada. Attention then shifts to major jobs data on both sides of the border, alongside US inflation and retail sales releases that may reshape expectations for the Fed’s next move. Canadian housing indicators, CPI and the BoC Outlook Survey provide important signals on domestic demand and inflation trends. Late-month US GDP, durable goods and Core PCE readings, followed by Canada’s GDP, could still drive volatility as markets refine rate and growth expectations for 2026.

The early-2026 policy calendar highlights a series of closely watched central bank meetings that are likely to shape global FX direction in the first quarter. The Bank of Japan leads off in late January, followed by the Federal Reserve and the Bank of Canada as markets assess the pace and timing of any further policy adjustments. Attention then shifts to Europe in early February, where decisions from the European Central Bank and the Bank of England will provide fresh guidance on inflation progress and growth risks. Together, these meetings are expected to drive volatility across major currency pairs as investors recalibrate rate expectations for the months ahead.