Canadian Dollar Forecast - April 2026

March showed that the Loonie is not trading as a straightforward oil-linked currency right now. Even with energy prices rising sharply, the Canadian dollar struggled as markets focused more heavily on haven demand for the U.S. dollar and on the risk that a prolonged external shock could slow Canadian and global growth. In other words, support from commodities has been offset by concern over the broader macro picture. That keeps the April outlook highly event-driven. If geopolitical tensions remain elevated and growth worries deepen, the Loonie could stay under pressure. If risk sentiment steadies and domestic data show resilience, the currency may regain some footing, especially given Canada’s link to the energy complex.

Forward projections assume geopolitical tensions remain elevated but contained, with energy markets continuing to price in a persistent risk premium while global growth expectations soften at the margin.

Geopolitical spotlight – energy markets, risk sentiment and growth outlook

A dominant theme shaping markets this month is geopolitical risk emanating from the Middle East, particularly around Iran and global oil supply routes.

Oil prices and supply risk: Ongoing instability in the Middle East continues to underpin crude prices, with supply concerns and transit risks keeping a geopolitical premium embedded in energy markets. This dynamic provides intermittent support to the Canadian dollar, reflecting Canada’s position as a major energy exporter.

Risk sentiment and USD demand: At the same time, elevated geopolitical uncertainty is reinforcing defensive positioning across global markets. Safe-haven demand for the U.S. dollar remains firm, particularly during periods of escalation, offsetting oil-driven gains in CAD and limiting sustained upside.

Domestic growth signals: Recent softness in labour market conditions and easing inflation suggest that Canada’s growth momentum is moderating. This introduces an additional layer of caution, as weaker domestic fundamentals reduce the Loonie's ability to fully capitalize on favourable commodity dynamics.

FX Implications

CAD support via commodities: Elevated oil prices continue to act as a structural support for the Canadian dollar, helping cushion downside pressure during periods of stable risk sentiment.

USD/CAD upside risk in risk-off phases: Episodes of heightened uncertainty are likely to favour the U.S. dollar, leaving USD/CAD biased higher during risk-off conditions despite supportive commodity pricing.

Range-bound but volatile conditions: The interaction between oil strength, global risk sentiment, and domestic data is expected to keep USD/CAD within a broad but reactive range, with short-term direction driven by incoming macro data and geopolitical developments rather than a sustained trend.

April’s central bank calendar will be a key driver for currency markets, with policy decisions from the Bank of Canada, Federal Reserve, Bank of Japan, European Central Bank and Bank of England all due this month. Markets will be watching closely for any shift in tone on inflation, growth and interest rate expectations, as divergence in policy guidance could shape U.S. dollar direction and keep USD/CAD and broader FX sentiment sensitive to central bank signals.

April’s central bank calendar will be a key driver for currency markets, with policy decisions from the Bank of Canada, Federal Reserve, Bank of Japan, European Central Bank and Bank of England all due this month. Markets will be watching closely for any shift in tone on inflation, growth and interest rate expectations, as divergence in policy guidance could shape U.S. dollar direction and keep USD/CAD and broader FX sentiment sensitive to central bank signals.