Weekly Currency Update: Canadian Dollar Forecast This Week

The US dollar moved lower through the week as progress toward a US-Iran peace deal reduced safe-haven demand and pulled oil prices sharply lower. Inflation data kept markets alert to price risks, but the reading was not strong enough to revive expectations for another near-term Fed hike. Next week, USD direction will depend on Fed commentary, US retail sales and whether peace talks continue to calm energy markets.

The Canadian dollar extended its weekly decline as falling oil prices weighed on the loonie’s commodity support. Optimism around a Middle East peace deal reduced crude’s risk premium, leaving CAD exposed despite broader improvement in global sentiment. Next week, CAD will be driven by Canadian inflation, oil prices, Bank of Canada expectations and the durability of the US-Iran peace framework.

The euro recovered some ground as the US dollar softened and lower oil prices eased immediate pressure on Europe’s energy outlook. Still, the single currency remained sensitive to inflation concerns after recent policy tightening signalled that price risks remain elevated. Next week, EUR will depend on ECB commentary, eurozone inflation signals and whether energy markets stay calmer.

Sterling strengthened as investors looked past soft UK growth data and focused instead on easing Middle East tensions. Lower oil prices helped reduce concerns about imported inflation, although UK inflation expectations remained uncomfortably high. Next week, GBP will be guided by Bank of England signals, UK inflation data, political developments and the path of oil prices.

The Japanese yen found modest relief as lower oil prices reduced pressure on Japan’s import bill and the US dollar softened. Even so, yen gains remained limited as markets continued to weigh weak domestic currency fundamentals against possible policy action. Next week, JPY will depend on Bank of Japan signals, US yields, inflation data and any renewed intervention warnings.

The Swiss franc softened as improving risk appetite reduced demand for defensive currencies. Lower oil prices and calmer geopolitical headlines encouraged investors to rotate away from traditional safe havens, although residual caution kept CHF from weakening sharply. Next week, CHF will track Middle East headlines, European rate expectations and any SNB comments on currency strength.

The Chinese yuan traded with a steadier tone as broad dollar softness helped relieve pressure on Asian currencies. Policy management continued to limit volatility, while investors remained cautious about China’s growth momentum and external demand. Next week, CNY will be shaped by Chinese activity data, trade signals, policy guidance and the broader US dollar trend.

The Indian rupee rebounded as lower oil prices eased pressure on India’s import bill and encouraged traders to unwind long-dollar positions. The currency also benefited from measures aimed at attracting foreign-currency inflows and stabilising market sentiment. Next week, INR will be driven by crude prices, RBI guidance, inflation expectations and foreign portfolio flows.

The Australian dollar remained cautious as traders balanced improved global sentiment against uncertainty ahead of the Reserve Bank of Australia’s next policy decision. Softer oil prices helped risk appetite, but signs of a cooling economy limited enthusiasm for the Aussie. Next week, AUD will depend on the RBA decision, China-linked data, commodity prices and broader risk appetite.

The New Zealand dollar traded with a modestly firmer tone as the weaker US dollar supported higher-beta currencies. Gains were limited by cautious global growth sentiment and the kiwi’s reliance on external risk appetite. Next week, NZD will be guided by domestic confidence data, China demand signals and whether investors continue moving away from defensive dollar positions.

The Mexican peso benefited from improved risk sentiment as hopes for a Middle East peace deal supported emerging-market assets. Carry demand remained a key source of support, although lower oil prices and uneven global flows kept gains measured. Next week, MXN will track US data, Banxico expectations, oil prices and broader emerging-market positioning.