Canadian Dollar Forecast - March 2026

The Canadian dollar’s recent performance reflected a firmer bias overall, with the loonie advancing against several major counterparts even as volatility persisted beneath the surface. CAD strengthened notably versus sterling and the euro over both the weekly and monthly horizons, with GBP/CAD and EUR/CAD trending lower, underscoring relative resilience against parts of Europe. The currency also gained ground against the Australian and New Zealand dollars on a monthly basis, suggesting that shifting growth expectations and commodity dynamics favoured Canada within the broader G10 complex. A modest dip in USD/CAD over the week pointed to some near-term support against the US dollar, even as the pair remains slightly higher on a one-month view.

Performance was more mixed across Asia and emerging markets. The Canadian dollar posted solid advances against the Japanese yen, Indian rupee, and Mexican peso over both timeframes, highlighting steady demand in select risk-sensitive and high-yielding crosses. However, CAD softened against the Swiss franc and Chinese yuan over the month, indicating that defensive flows and regional growth trends continue to influence cross-currency positioning. Overall, the data portrays a Canadian dollar that is broadly supported but not uniformly strong, with gains concentrated in European and select emerging-market pairs while remaining sensitive to global risk appetite and commodity-driven shifts.

Forward projections assume no major extensions of geopolitical disruptions beyond current headlines and a gradual reinforcement of commodity support for the loonie.

Geopolitical Spotlight – Iran, Oil & Risk Prices

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 & Supply Concerns: A sharp escalation in US and allied military actions tied to Iran has lifted oil market stress, disrupting shipping patterns in the Strait of Hormuz, a strategically critical passage through which roughly 20 % of global crude moves. These developments have triggered price jumps in Brent and WTI crude, with prices surging toward multi-month highs and analysts warning that upside risks remain if the conflict deepens.

Geopolitical Risk Premium: Traders are factoring in a sizeable geopolitical premium into energy prices. Supply-risk concerns, whether from partial transit disruptions or the broader security environment, have elevated crude valuation beyond fundamental demand/supply balances. This premium has buttressed commodity-linked FX flows like CAD, given Canada’s energy export profile.

FX Implications

CAD support via oil: Rising crude prices can provide tactical support for the Canadian dollar as export receipts improve and carry flows adjust.
Risk-off dollar demand: At the same time, sharp risk aversion, which often accompanies geopolitical shocks, can buoy the US dollar, counteracting CAD gains especially when investors seek safe-haven assets.
Volatility squeeze: Rapid swings in energy benchmarks tend to compress CAD ranges intraday, intensifying the need for careful timing in corporate FX transactions.

This complex interplay underscores how energy markets and geopolitical risk now sit at the heart of short-term CAD direction.

March’s calendar centres on labour markets, inflation, and growth data, with several high-impact releases poised to drive near-term Canadian dollar volatility. Early in the month, US ADP employment and nonfarm payrolls will set the tone for USD momentum and overall risk appetite, while remarks from Bank of Canada Governor Macklem may shape expectations around the domestic rate outlook. Canada’s employment change and unemployment rate later in the month will provide a crucial read on labour-market resilience.

Inflation and activity data then take focus, beginning with US CPI and followed by Canadian building permits and trade balance figures. Mid-month releases, including US GDP and core PCE inflation, are likely to influence rate-cut expectations and broader USD direction. The calendar closes with Canadian inflation, retail sales, and month-end GDP, offering a comprehensive snapshot of domestic demand and growth conditions as markets position for April.

The late-Q1 policy calendar features a concentrated run of major central-bank decisions with the potential to drive FX volatility into early Q2. Mid-March brings simultaneous policy announcements from the Bank of Canada and the Federal Reserve, followed closely by decisions from the Bank of Japan and the Bank of England. Attention then shifts to the European Central Bank in early April, with updated guidance on inflation trends and growth risks likely to shape cross-currency flows.