Weekly Currency Update: Canadian Dollar Forecast This Week

The US dollar traded with a mild downward bias this week, with the Dollar Index hovering in the mid to high 96s before easing slightly into Friday’s close, ending modestly lower than where it began. Price action remained largely range-bound as markets digested mixed US economic signals, including labour data that pointed to stabilisation alongside softer retail momentum, keeping conviction limited ahead of key inflation updates. Cooler CPI expectations reinforced the view that the Federal Reserve may stay on hold or begin easing later in the year, which capped upside for the greenback and encouraged a more cautious tone in dollar positioning. Broader FX flows also leaned against the USD, with the Japanese yen posting one of its strongest weekly performances and currencies such as the euro and Australian dollar gaining modest ground. Institutional hedging activity remained elevated, reflecting guarded sentiment and a preference to reduce exposure as rate expectations continue to shift.

The Canadian dollar remained relatively firm this week, holding near multi-day highs early on before easing slightly into Friday, but still finishing with a mild net gain against the US dollar. The loonie was supported at the start of the week by resilient domestic labour signals, including a multi-month low in the unemployment rate, alongside reports that speculative positioning turned net-long CAD for the first time since 2023. Broader US dollar softness also provided a tailwind, as cooler inflation expectations and softer CPI dynamics reinforced the view that the Federal Reserve may lean toward easing later in the year, helping CAD retain strength despite some mid-week volatility. Commodity conditions added a mixed influence, with a modest rebound in oil offering support before later weakness in energy and equities briefly tempered gains. Overall, the week reflected steady underlying demand for the Canadian dollar, with risk sentiment and upcoming inflation data set to remain key drivers going forward.

The euro held a modestly firmer tone this week, trading with a slight upward bias against the US dollar as broader USD softness helped keep EUR/USD supported into the close. The single currency benefited from a steadier risk backdrop and market positioning that leaned against the dollar amid cooling US inflation expectations and a more cautious Fed outlook. ECB-related developments also helped underpin sentiment, with policymakers maintaining confidence that inflation will stabilise over time while broader initiatives to strengthen the euro’s global role added to the constructive narrative. At the same time, macro signals across the euro zone remained mixed, with inflation dynamics and external trade headwinds limiting the scope for a more decisive breakout. Overall, the euro finished the week marginally higher, with upcoming eurozone inflation updates and US CPI likely to remain central in shaping direction next week.

Sterling traded in a largely range-bound fashion this week, finishing broadly flat against the US dollar after early political pressure and ongoing Bank of England uncertainty kept momentum limited. The pound began the week on a softer footing as UK leadership tensions added a risk premium to positioning, while markets continued to weigh the BoE’s outlook amid rising expectations that rate cuts could emerge later this year. Moves remained contained as shifting US dollar dynamics offset sterling’s attempts to build traction, with softer inflation cues weighing on the greenback at times but broader risk sentiment preventing a clear break higher for GBP. Overall, the week reflected consolidation rather than direction, leaving the pound steady into Friday with upcoming UK inflation, labour data and political developments likely to be key drivers of sentiment going forward.

The Japanese yen delivered a standout performance this week, strengthening sharply against the US dollar as USD/JPY trended steadily lower and finished the period in the mid-153s. The move reflected one of the yen’s strongest weekly gains in roughly 15 months, supported early on by political developments following Japan’s general election, which helped restore confidence and triggered renewed demand for the currency. Momentum was reinforced as softer US inflation expectations and shifting rate outlooks narrowed perceived yield advantages, while Bank of Japan signals and speculation around future policy adjustments added further support. Risk sentiment also played a role, with bouts of uncertainty in global equities encouraging safe-haven flows into the yen. Overall, the week marked a decisive improvement in JPY positioning, with upcoming BoJ guidance, US inflation data and broader market volatility set to remain key drivers next week.

The Swiss franc strengthened modestly this week, with USD/CHF trending lower overall as safe-haven demand and broader US dollar softness supported steady inflows into defensive currencies. The franc saw its strongest levels early in the week when the pair dipped toward the mid-0.76s, reflecting a combination of cautious global sentiment and easing confidence in the dollar’s rate support. Switzerland’s low inflation backdrop remained in focus, with price pressures sitting near the bottom of the SNB’s target range, reinforcing expectations that rates will stay anchored near 0%, even as policymakers remain attentive to the challenges of an overly strong currency. Episodes of risk aversion through the week further underpinned CHF demand, leaving the franc slightly firmer into Friday’s close, with global market volatility, Fed expectations and SNB communication likely to remain key drivers going forward.

The Chinese yuan held a mildly firmer tone this week, strengthening modestly against the US dollar as USD/CNY drifted lower overall before a small uptick into Friday’s close. The move reflected a continuation of the yuan’s steady multi-week appreciation trend, supported in part by broader US dollar softness as cooler inflation signals and shifting Fed rate expectations reduced demand for the greenback. Seasonal factors also remained supportive, with Lunar New Year-related FX flows and exporter conversions helping reinforce underlying yuan demand through mid-week. The People’s Bank of China maintained a managed policy approach, signalling a moderately loose stance that limits rapid currency swings but still allows gradual firmness. Overall, the week left the yuan slightly stronger on net, with upcoming PBOC guidance, US macro data and China’s trade signals set to remain key drivers going forward.

The Indian rupee traded with limited direction this week, holding broadly steady against the US dollar as USD/INR fluctuated only modestly and finished near where it began. The currency found some early support from improving global cues and ongoing optimism around the India–US trade framework, which helped underpin sentiment at the start of the period. Mid-week gains were also aided by foreign investment inflows and expectations of RBI presence in the market, keeping downside pressures contained. However, corporate dollar demand and intermittent risk-off positioning weighed into Friday, leaving the rupee close to flat overall despite brief strengthening phases. With volatility muted, attention now shifts to US inflation trends, oil price dynamics and portfolio flows, which remain central drivers for INR performance next week.

The Australian dollar delivered a solid performance this week, strengthening against the US dollar as AUD/USD pushed to fresh 2026 highs above 0.71 mid-week before easing slightly into Friday’s close. The currency was underpinned by continued hawkish expectations around the Reserve Bank of Australia, with markets maintaining a tightening bias that supported demand for the Aussie near multi-month levels. Improved global risk sentiment early in the week also lifted risk-linked currencies, helping AUD build momentum alongside a rebound in equities, though late-week volatility and a firmer US dollar tone moderated gains into the finish. Overall, the Aussie still ended the period modestly higher on net, with upcoming RBA signals, US inflation data and shifts in broader market sentiment set to remain key drivers going into the next week.

The New Zealand dollar finished the week slightly firmer against the US dollar, holding near the 0.60 area and recovering modestly into Friday after facing pressure through the middle of the period. The kiwi began the week relatively steady, but softer domestic labour signals, including a rise in unemployment, weighed on sentiment by pushing out expectations for any near-term RBNZ tightening. Mid-week, a firmer US dollar tone and bouts of risk aversion capped upside and pulled NZD/USD closer to the 0.6000 level. By the end of the week, improved stability in broader FX flows allowed the currency to regain some lost ground, leaving NZD modestly stronger versus its mid-week lows, with upcoming New Zealand data, US inflation signals and global risk sentiment set to remain key drivers going forward.

The Mexican peso strengthened modestly this week, gaining ground against the US dollar as USD/MXN trended lower and finished near the bottom of its weekly range. The move was supported by broader US dollar softness, with cooler inflation signals and muted Fed expectations helping lift emerging-market currencies, while regional risk appetite and rising commodity-linked sentiment across Latin America added further support. Mexico’s domestic backdrop also remained constructive, with inflation pressures keeping Banxico cautious and policy rates steady at relatively high levels, reinforcing the peso’s appeal through carry and yield demand. Overall, the week reflected steady underlying support for MXN, with upcoming US macro data, Banxico signals and regional market flows likely to remain central drivers going forward.