Weekly Currency Update: Canadian Dollar Forecast This Week

The US dollar strengthened through the week as rising Treasury yields and renewed inflation concerns pushed markets to reprice the Federal Reserve outlook. Higher oil prices and fading hopes for a swift Iran resolution restored demand for the greenback, while resilient US data added to the case for tighter policy for longer. Next week, USD direction will depend on US inflation signals, Fed commentary and whether geopolitical tensions keep energy prices elevated.

The Canadian dollar weakened despite higher oil prices, as broad US dollar strength and widening yield pressure outweighed the loonie’s commodity support. Domestic data offered some positives, including stronger housing starts and factory sales, but investors focused more on the stronger greenback and shifting rate expectations. Next week, CAD will be driven by Canadian inflation, oil prices, Bank of Canada pricing and Middle East developments.

The euro came under pressure as the stronger US dollar and rising Treasury yields weighed on major currencies. Energy-market uncertainty also remained a concern for the eurozone, with higher oil prices threatening to keep inflation sticky while weakening growth prospects. Next week, EUR will depend on ECB commentary, eurozone data and whether oil-driven inflation risks intensify.

Sterling had a difficult week as political uncertainty in the UK added to pressure from a stronger US dollar and higher global yields. Concerns around leadership instability, fiscal risk and inflation kept investors cautious toward the pound. Next week, GBP will be guided by UK inflation, retail data, Bank of England signals and domestic political developments.

The Japanese yen remained under pressure as rising US yields and broad dollar strength kept the currency on the defensive. Intervention risk stayed in focus after recent official action, but markets continued to test Japan’s tolerance for yen weakness. Next week, JPY will depend on Japanese inflation data, Bank of Japan signals, US yields and any renewed intervention warnings.

The Swiss franc held relatively steady, supported by defensive demand but limited by the stronger US dollar. Safe-haven flows remained present as geopolitical tensions persisted, though the franc did not dominate market moves. Next week, CHF will track geopolitical headlines, European rate expectations and any Swiss National Bank guidance on currency strength.

The Chinese yuan strengthened to multi-year highs during the week, supported by improved sentiment around China and a relatively stable policy backdrop. However, authorities appeared cautious about excessive yuan gains, keeping the currency’s advance measured. Next week, CNY will be shaped by Chinese activity data, policy signals, trade headlines and the broader US dollar trend.

The Indian rupee remained vulnerable as higher oil prices revived concerns about India’s import bill and inflation outlook. A stronger US dollar also weighed on emerging-market currencies, limiting the rupee’s ability to recover. Next week, INR will be driven by crude prices, RBI signals, inflation expectations and foreign portfolio flows.

The Australian dollar paused after a strong run as broad US dollar strength and rising yields cooled demand for risk-sensitive currencies. Still, carry demand and commodity-linked support helped prevent a deeper pullback. Next week, AUD will depend on Australian data, RBA expectations, China-linked sentiment and global risk appetite.

The New Zealand dollar traded cautiously as risk sentiment softened and the US dollar regained momentum. With limited domestic catalysts, the kiwi remained tied closely to global appetite for risk and broader commodity-currency performance. Next week, NZD will be guided by business confidence, China-related signals and any shift in geopolitical risk.

The Mexican peso held relatively firm compared with several peers, supported by carry demand even after Banxico’s recent rate cut. However, stronger US yields and cautious emerging-market sentiment capped further gains. Next week, MXN will track US inflation, Banxico expectations, oil prices and broader emerging-market flows.