Weekly Currency Update: Canadian Dollar Forecast This Week

The US dollar lost ground through the week after a softer-than-expected CPI print reinforced the view that inflation pressures are easing. The data prompted a pullback in US yields and led markets to scale back expectations for prolonged restrictive Federal Reserve policy. Despite renewed geopolitical tensions, safe-haven demand remained muted. Next week, USD direction will hinge on retail sales, Federal Reserve commentary and whether incoming data confirms a cooling inflation trend.

The Canadian dollar strengthened as rising oil prices provided a firm tailwind amid renewed US-Iran tensions. The loonie benefited from its commodity linkage, with crude gains offsetting broader uncertainty and lifting sentiment. A softer US dollar also supported the move, pushing USD/CAD lower through the week. Next week, CAD will be driven by oil price dynamics, Canadian inflation data and broader global risk sentiment.

The euro gained modest ground as the US dollar weakened following softer US inflation data. While eurozone growth concerns persisted, the shift in US rate expectations supported the single currency. Next week, EUR will depend on eurozone PMI data, ECB communication and global risk sentiment.

Sterling moved higher, supported by the weaker US dollar and relatively steady domestic data. Improved sentiment allowed the pound to gain, though upside remained measured amid growth concerns. Next week, GBP will be guided by UK inflation and labour data, Bank of England signals and broader market conditions.

The Japanese yen strengthened as lower US yields reduced pressure from rate differentials. The softer US dollar provided additional support, though gains remained contained by ongoing policy divergence. Next week, JPY will depend on US yield movements, domestic inflation data and any signals from Japanese authorities.

The Swiss franc firmed slightly as the weaker US dollar and renewed geopolitical tensions supported demand for safe-haven assets. While broader sentiment remained stable, the franc benefited from its defensive appeal. Next week, CHF will track geopolitical developments, European data and SNB commentary.

The Chinese yuan strengthened modestly as the softer US dollar provided support, though gains were limited by domestic growth concerns. Authorities continued to manage the currency closely. Next week, CNY will be shaped by Chinese economic data, policy signals and global trade developments.

The Indian rupee traded with a mixed but slightly firmer tone as a weaker US dollar offset the impact of rising oil prices. Improved sentiment helped stabilise the currency. Next week, INR will be influenced by oil price trends, RBI guidance, inflation data and capital flows.

The Australian dollar strengthened as improved global sentiment and a weaker US dollar supported demand for risk-sensitive currencies. Commodity price gains also provided support, though China concerns capped upside. Next week, AUD will depend on domestic data, RBA expectations and global risk appetite.

The New Zealand dollar moved higher alongside other high-beta currencies as the US dollar weakened. Gains remained moderate amid ongoing growth concerns. Next week, NZD will be guided by domestic indicators, China demand signals and broader market trends.

The Mexican peso strengthened as improved risk appetite and a softer US dollar supported emerging-market currencies. Rising oil prices added support, though external conditions remained key. Next week, MXN will track US data, Banxico expectations, oil prices and capital flows.