Weekly Currency Update: Canadian Dollar Forecast This Week

The US dollar traded with a firm tone through the week as geopolitical tensions in the Middle East supported safe-haven demand and kept investors positioned defensively. Early sessions saw the greenback draw support from resilient US business surveys and steady Treasury yields, reinforcing the perception that the US economy continues to outperform several global peers. However, late-week data softened the dollar’s momentum after February’s payroll report surprised to the downside and the unemployment rate edged higher, prompting markets to reassess the strength of the labour market. Despite that moderation, the dollar remained broadly supported across major crosses. In the sessions ahead, markets will closely monitor US inflation signals, Federal Reserve commentary and geopolitical developments, all of which remain central to the dollar’s near-term trajectory.

The Canadian dollar delivered a resilient performance over the week, supported primarily by rising crude oil prices as geopolitical tensions disrupted global energy markets. Early risk-off sentiment initially lifted the US dollar and pushed USD/CAD slightly higher, but the loonie regained traction as the oil rally intensified and reinforced Canada’s commodity-linked advantage. Domestic data added a modest layer of support after Canada’s manufacturing PMI climbed to its strongest level in more than a year, signalling improved activity in the industrial sector. As a result, the Canadian dollar finished the period on firmer footing against several major peers. Looking ahead, market attention will focus on oil price momentum, upcoming Canadian economic releases and broader US macro developments, all of which remain pivotal for the loonie’s near-term direction.

The euro faced persistent pressure through the week as rising energy prices and geopolitical uncertainty darkened the outlook for the euro area economy. Escalating tensions in the Middle East drove crude oil prices higher, amplifying concerns about Europe’s vulnerability to imported energy costs and their potential impact on inflation and growth. With limited fresh policy signals from the European Central Bank, the single currency struggled to generate sustained upside momentum. Against the Canadian dollar, the euro remained on the defensive as the loonie drew support from the same oil rally that weighed on the eurozone outlook. In the coming sessions, direction will hinge on euro area inflation data, ECB communication and shifts in global risk sentiment.

Sterling navigated a mixed week as markets balanced steady domestic activity indicators against a more uncertain global backdrop. UK services sector data remained broadly supportive, helping underpin the pound during parts of the week. However, persistent inflation concerns and renewed geopolitical tensions raised questions about the broader economic outlook and limited the currency’s upside momentum. The UK’s exposure to rising energy costs also tempered investor optimism as oil prices surged during the period. Against the Canadian dollar, sterling struggled to maintain gains as the loonie benefited more directly from the commodity rally. In the days ahead, attention will centre on incoming UK macro data, Bank of England guidance and evolving global risk sentiment.

The Japanese yen experienced a volatile but generally softer week as global energy prices surged and the US dollar retained a firm footing across currency markets. Bank of Japan Governor Kazuo Ueda reiterated that policy tightening would remain gradual and dependent on incoming economic data, which did little to strengthen expectations for near-term policy shifts. At the same time, Japan’s heavy reliance on imported energy made the currency particularly sensitive to rising oil prices, which weighed on sentiment. As a result, the yen struggled to hold ground against commodity-linked currencies such as the Canadian dollar. In the sessions ahead, markets will look toward Japanese growth data, Bank of Japan commentary and global risk sentiment for clearer direction.

The Swiss franc initially strengthened as investors sought traditional safe-haven assets amid escalating geopolitical tensions. Defensive flows pushed the currency to multi-year highs against the euro before officials from the Swiss National Bank signalled a willingness to intervene if excessive appreciation threatened financial stability. That guidance helped moderate the franc’s advance later in the week, though safe-haven demand remained a supportive backdrop. Against the Canadian dollar, however, gains were more limited as the loonie benefited from surging crude prices. Looking ahead, markets will monitor geopolitical developments, US macroeconomic data and any further signals from the SNB that could influence sentiment toward the franc.

The Chinese yuan traded with a weaker bias through the week as broad US dollar strength and global risk aversion weighed on emerging market currencies. Authorities in Beijing attempted to stabilise sentiment by setting firmer daily midpoint fixings and signalling a preference for orderly currency moves. Despite these efforts, the yuan remained under pressure as corporate demand for dollars increased and external uncertainty intensified. Against the Canadian dollar, the yuan struggled to maintain ground as the loonie gained support from rising commodity prices. In the coming sessions, investors will focus on policy signals from the People’s Bank of China, capital flow trends and shifts in global dollar demand.

The Indian rupee faced renewed pressure during the week as rising oil prices revived concerns about the country’s external balance and inflation outlook. As a major energy importer, India is particularly vulnerable to surging crude costs, which weighed on investor sentiment toward the currency. The Reserve Bank of India was seen actively smoothing volatility in the market, helping prevent disorderly moves even as the rupee approached record lows during mid-week trading. Against the Canadian dollar, the rupee remained under pressure as higher oil prices supported the commodity-linked loonie. In the sessions ahead, rupee direction will remain closely tied to oil price dynamics, RBI intervention signals and shifts in global risk sentiment.

The Australian dollar experienced a volatile but broadly stable week as investors weighed hawkish signals from the Reserve Bank of Australia against a cautious global risk environment. RBA Governor Michele Bullock indicated that further policy tightening could still be considered if inflation expectations become unanchored, offering some support to the currency early in the week. At the same time, geopolitical tensions and shifting risk sentiment limited the scope for a sustained rally. Commodity price movements provided intermittent support, though the Canadian dollar ultimately benefited more directly from the surge in crude prices. In the coming sessions, markets will monitor Australian inflation data, RBA guidance and broader global sentiment for clearer direction.

The New Zealand dollar traded with a cautious tone as global risk sentiment fluctuated throughout the week. As a high-beta currency, the kiwi remained particularly sensitive to swings in investor appetite, retreating during periods of heightened geopolitical uncertainty before stabilising as broader market sentiment improved. The Reserve Bank of New Zealand maintained a steady policy stance, offering little immediate catalyst for a sustained move. Against the Canadian dollar, NZD struggled to keep pace as the loonie drew stronger support from the oil rally. In the sessions ahead, attention will turn to RBNZ communication, global growth signals and commodity market trends that shape the kiwi’s near-term outlook.

The Mexican peso held within a narrow corridor, with USD/MXN showing a slight upward tilt as broader dollar firmness trimmed earlier stability. Price action lacked strong directional conviction, reflecting a balance between supportive domestic fundamentals and external pressure from a steadier greenback. Elevated inflation and Banxico’s relatively high policy rate continued to anchor the peso’s yield appeal, helping cushion downside moves even as global FX flows favoured the US dollar at times. Solid late-2025 growth momentum also reinforced underlying resilience, though not enough to generate a decisive rally. Risk sentiment across emerging markets remained mixed, keeping volatility contained and preventing a sharp break in either direction. In the week ahead, focus will remain on US macro signals and Federal Reserve expectations, Banxico guidance and inflation trends, oil price dynamics and broader capital flows into emerging markets.