Weekly Currency Update: Canadian Dollar Forecast This Week

The US dollar traded unevenly through the week, supported at times by safe-haven demand and firmer yields but pressured by heavy losses against the yen after Japan intervened to support its currency. Central banks largely held rates steady, while markets continued to weigh whether inflation risks from the Middle East conflict will delay any easing cycle. The greenback also softened late in the week as renewed hopes for Iran talks reduced some demand for defensive assets. Next week, the dollar will be driven by Fed guidance, US inflation and jobs data, and whether geopolitical tensions keep energy markets volatile.

The Canadian dollar strengthened over the week, supported by broad US dollar softness, firm oil prices and expectations that the Bank of Canada may have to keep policy tighter if energy-driven inflation persists. The Bank of Canada held rates steady but signalled that future moves would likely be small if its forecasts hold, while also noting that high oil prices can lift Canadian export revenues even as they squeeze households and businesses. The loonie was headed for its strongest monthly gain in about a year by late April. Next week, CAD direction will depend on Canadian labour data, oil prices, Bank of Canada repricing and any shift in Middle East diplomacy.

The euro found support from the weaker US dollar and rising expectations that the European Central Bank may need to respond if energy-driven inflation pressure persists. German inflation accelerated in April as energy costs rose, reinforcing the view that the eurozone is still exposed to the Middle East shock despite some easing in broader risk sentiment. At the same time, recession concerns remained in focus as policymakers warned that geopolitical tensions could weigh on growth. Next week, euro traders will watch ECB commentary, inflation expectations, eurozone activity data and any development that affects energy supply risk.

Sterling traded cautiously as investors balanced sticky inflation risks against a weaker UK growth outlook. The Bank of England held rates steady and warned that the Iran war could create a range of inflation outcomes, including a scenario that might require forceful rate increases if energy pressures intensify. That policy caution helped limit sterling losses, but concerns over the UK’s exposure to higher energy costs and slower growth kept the pound from gaining clear momentum. Next week, the pound will be guided by Bank of England commentary, UK activity data, gilt-market sentiment and geopolitical headlines.

The Japanese yen dominated currency markets after authorities stepped in to support it for the first time in nearly two years. The intervention followed a slide toward the 160-per-dollar area and triggered a sharp rebound, with the dollar set for its steepest weekly loss against the yen in more than two months. Japan’s action highlighted official concern over imported inflation, oil-driven pressure and speculative currency moves. Next week, yen direction will depend on whether Tokyo signals further intervention, how markets price the Bank of Japan’s June outlook, and whether energy prices keep Japan’s trade balance under pressure.

The Swiss franc remained supported by safe-haven demand, though its upside was contained by the Swiss National Bank’s clear discomfort with excessive appreciation. SNB officials warned that the Middle East conflict is likely to slow growth and lift inflation in Switzerland, leaving policymakers with a difficult balance between price stability and currency strength. The franc therefore stayed firm but avoided a more aggressive rally as traders remained alert to possible policy pushback. Next week, CHF will track geopolitical headlines, broader European rate expectations and any fresh SNB signal on currency intervention.

The Chinese yuan traded with a steadier tone as stronger factory activity helped offset pressure from renewed dollar demand and global uncertainty. China’s private manufacturing PMI improved in April, suggesting parts of the industrial sector remained resilient despite external risks and energy-market volatility. Even so, Beijing’s preference for orderly currency conditions kept moves contained, and investors remained cautious about capital flows and global demand. Next week, the yuan will be shaped by Chinese trade signals, policy guidance, domestic activity data and the broader direction of the US dollar.

The Indian rupee remained vulnerable as higher oil prices and importer hedging continued to weigh on sentiment. Dollar sales by state-run banks helped cushion the currency early in the week, but the rupee stayed closely tied to crude prices, equity flows and expectations for Reserve Bank of India support. India’s exposure to imported energy kept the currency sensitive to every shift in Middle East diplomacy. Next week, rupee direction will depend on oil prices, RBI signals, domestic inflation expectations and foreign portfolio flows.

The Australian dollar drew support from expectations that the Reserve Bank of Australia may raise rates again as inflation pressure builds. Australian inflation jumped sharply in March, driven by fuel costs, and markets moved to price a May rate hike as policymakers confront the spillover from the Middle East energy shock. Still, the Aussie remained sensitive to broader risk sentiment and China-linked demand signals. Next week, AUD will be driven by the RBA decision, commodity prices, Chinese data and whether global investors continue to rotate into risk-sensitive currencies.

The New Zealand dollar traded with a cautious tone, supported by improved global sentiment at times but held back by the Reserve Bank of New Zealand’s careful stance. The RBNZ has warned that the Middle East conflict could lift inflation while weighing on growth, leaving the kiwi vulnerable to shifts in risk appetite and external price shocks. Without a strong domestic catalyst, NZD continued to move largely with broader market mood. Next week, traders will watch New Zealand business confidence, inflation expectations, China-related demand and geopolitical developments.

The Mexican peso remained relatively resilient, supported by attractive yield dynamics and a broader trend of strength against the US dollar. Even so, gains were harder to extend as global risk appetite stayed uneven and the dollar found periodic safe-haven support. The peso’s performance continued to depend on whether carry demand could overcome external volatility. Next week, MXN will track US data, Banxico expectations, oil-market swings and broader emerging-market flows.