Weekly Currency Update: Canadian Dollar Forecast This Week

The USD’s resilience in 2025 continues to surprise, supported by lower-than-feared effective tariffs, front-loaded exports, limited bond-market fallout from fiscal stimulus, and low unemployment helped by Trump-era immigration restrictions. The AI investment boom has been another major pillar, lifting growth expectations, driving post–Liberation Day equity gains and attracting unhedged foreign inflows. But markets are now reassessing AI’s near-term macro impact, with some investors warning it could dampen labour demand and inflation, pushing the Fed slightly more dovish and weighing on tech stocks and by extension the USD. Nonfarm payrolls reinforced this shift by showing cooling labour momentum just as official data resumes after the shutdown. For now the USD can still lean on its high-yield, safe-haven appeal, but any renewed tech weakness, soft US data or dovish Fed signals could erode its recent gains.

Loonie remains stuck above 1.40 despite outperforming most other commodity currencies this month, reflecting a market that is still cautious about the CAD's near-term trajectory. The currency initially found support after the narrow passage of the 2026 Budget, mainly because it removed the risk of snap elections. Meanwhile, Canada’s latest CPI release did little to shift the broader inflation narrative: headline inflation is holding close to 2 percent, but core readings remain stubbornly about one percentage point higher, keeping the Bank of Canada firmly in wait-and-see mode. Retail sales for September and October may offer mixed signals, but unless they reveal more persistent weakness, the slightly overvalued USD/CAD could gradually drift lower in the weeks ahead, helped by seasonality and the potential for the pair to finally break its upward channel in the near-term.

The euro remains without a single dominant driver at the moment, but sentiment toward the currency has clearly softened as investors remain unconvinced by the Eurozone’s weak growth outlook and the lack of meaningful equity market inflows it attracts. Even with prospects of fiscal support boosting certain pro-cyclical sectors like banks, European auto stocks continue to struggle, leaving the EUR looking like collateral damage from persistent US–China geopolitical tensions. With next week’s Eurozone data calendar relatively light, attention will shift to remarks from key ECB officials. For now, EUR is likely to shadow broader US dollar direction, though the euro could take on a modest safe-haven role against more risk-sensitive G10 currencies if global sentiment deteriorates.

The pound remains under pressure ahead of the 26 November autumn statement, even though expectations for fiscal austerity have been revised down after reports that the OBR has upgraded its UK economic projections. While this may allow Chancellor Reeves to avoid measures such as income tax hikes, it has not lifted GBP because FX investors still question the credibility of OBR forecasts. That said, the OBR used unusually conservative wage growth and inflation assumptions in its March assessment, so upward revisions, alongside lower productivity estimates, could still improve the fiscal outlook and bolster credibility. Importantly, many budget negatives already appear priced into sterling. Overall, provided the autumn statement avoids major growth-negative surprises, we think GBP can stabilize.

The yen remains under heavy pressure as USD/JPY edges toward last year’s highs, with markets showing little fear of imminent intervention despite Finance Minister Katayama's strong warnings. While the recent rise in US unemployment has offered the yen a brief relief, authorities are now hoping that the resumption of US economic data post-shutdown may provide more fundamental support. For the JPY, however, the bigger drag is domestic: investors are increasingly uneasy about Prime Minister Takaichi’s influence over the BoJ and the risk that rate hikes could be delayed further. Added pressure comes from diplomatic tensions with China, and renewed concerns over Japan’s fiscal trajectory amid Takaichi’s sizeable spending plans. In the coming days, the yen’s direction will hinge on Tokyo inflation, any shifts in tone from BoJ, potential escalation in China–Japan tensions and the long-dated JGB auction.

The Swiss franc has eased slightly after last week’s dramatic surge as risk-off flows briefly supercharged demand for the CHF. While global sentiment remains fragile, the franc’s momentum has stalled, partly because the yen’s sharp underperformance has limited broader safe-haven bids. Domestic developments have also taken some shine off the franc: Switzerland’s first Q3 GDP estimate showed a deeper contraction than expected, and October trade data pointed to a narrowing surplus and volatile US export flows. Looking ahead, the franc’s exceptional strength may gradually unwind if global uncertainties ease and the domestic economy stabilizes. With a light data calendar, markets will watch upcoming remarks from SNB President Schlegel for any signs that the SNB might step up its currently very mild pushback against excessive CHF appreciation.

The yuan held broadly steady as the PBOC set a slightly firmer daily fixing , a signal that policymakers still want to lean against excessive weakness even as global FX volatility rises. Recent moves have been modest as the yuan has inched higher over the past month and is up slightly over the past year, but its path remains highly sensitive to incoming data and global dollar trends. This week, markets will watch how the PBOC manages the midpoint, whether domestic indicators such as trade, output and retail data confirm a steady growth pulse, and whether US yields or stronger US data put renewed pressure on USD/CNY. Structural factors and policy communication also matter: signs of capital inflows, export repatriation or further FX-management measures could help support the yuan, while lingering property sector and consumption headwinds keep the currency’s recovery gradual rather than forceful.

The rupee slipped to a new record low near 89.48 per USD, as persistent importer demand for dollars, weak foreign portfolio flows and uncertainty around a potential US–India trade deal kept upward pressure on USD/INR. Even with this new low, the currency remains largely range-bound, reflecting a heavily managed market where RBI intervention plays a central role. India’s FX reserves rose meaningfully in mid-November, offering the RBI more room to stabilize INR if needed, but broader pressures haven’t eased: high import bills, lingering tariff risks and a firm USD continue to cap any recovery. The near-term outlook hinges on how aggressively the RBI defends key levels, whether US–India trade talks regain momentum, and how global dollar moves shape external financing conditions.

Australian monthly inflation data will be closely watched next week, as it will be the first release with a full data set. Even though the RBA still prioritizes quarterly readings, markets will react to the monthly print. The expiry of electricity subsidies, firm domestic demand and rising new home prices are expected to keep headline inflation above the RBA’s target and push trimmed-mean inflation back above target for the first time in a year. Such an outcome would reinforce expectations that the RBA is likely on hold for now. The bigger risk for the AUD is a downside surprise in inflation; it would take exceptionally strong data to shift market pricing toward rate hikes and meaningfully lift the currency at this stage.

The RBNZ is widely expected to cut the OCR by 25 bps to 2.25% next week. Its earlier 50 bp cut in October helped lift business activity and confidence back toward multi-year highs, but household sentiment remains weak, and the labour market is still soft. While inflation has reaccelerated to the top of the RBNZ’s 1–3% band, inflation expectations remain subdued, and policymakers view the pickup as temporary. With markets fully priced for a 25 bp cut and only a slim chance of further easing, a meeting outcome in line with expectations should offer the NZD modest support, provided the RBNZ avoids signalling deeper cuts before confirming inflation pressures are indeed transitory.

The Mexican peso continues to look resilient. The broader tone has improved as well: UBS recently upgraded its outlook for the currency, citing support from an eventual easing cycle by the Federal Reserve. Strong interest-rate differentials and Mexico’s export-driven ties to the US remain underlying pillars for the peso, while analysts note that resistance near 18.50 in USD/MXN has capped dollar advances. In the near term, the peso’s path will be shaped by shifts in Fed policy expectations, Mexico–US trade dynamics, and domestic inflation signals. If US yields ease and Mexican policy stays steady, the peso could extend its stability; however, renewed USD strength, softer US demand or any tariff-related headlines could quickly reintroduce pressure.