Weekly Currency Update: Canadian Dollar Forecast This Week

The US dollar strengthened through the week as stronger-than-expected US jobs data revived expectations that the Federal Reserve may need to keep policy restrictive for longer. The greenback also drew support from uncertainty around Middle East peace talks, with investors reluctant to fully unwind defensive positions. Next week, USD direction will depend on US inflation signals, Fed commentary and whether geopolitical risks continue to support safe-haven demand.

The Canadian dollar weakened for the week but found late support after Canada delivered a much stronger-than-expected employment report. The loonie was pressured earlier by broad US dollar strength and cautious risk sentiment, but resilient job creation helped limit losses and revived expectations for a firmer Bank of Canada stance. Next week, CAD will be driven by Canadian inflation expectations, oil prices, Bank of Canada pricing and progress in US-Iran negotiations.

The euro came under pressure as the stronger US dollar and firmer US rate expectations weighed on major currencies. The single currency also remained sensitive to energy-market uncertainty, with investors watching whether Middle East negotiations can reduce inflation risks for the eurozone. Next week, EUR will depend on ECB commentary, eurozone activity signals and whether oil-price volatility eases or returns.

Sterling softened as broad US dollar strength overshadowed the pound’s domestic backdrop. UK investors remained focused on the balance between sticky inflation risks and softer growth momentum, leaving the currency without a clear independent catalyst. Next week, GBP will be guided by UK data, Bank of England commentary, gilt-market sentiment and broader global risk appetite.

The Japanese yen remained under pressure as stronger US yields and renewed dollar demand kept the currency on the defensive. Intervention risk stayed in focus, but markets continued to test Japan’s tolerance for yen weakness as policy divergence remained wide. Next week, JPY will depend on US yields, Bank of Japan signals, Japanese inflation data and any escalation in intervention rhetoric.

The Swiss franc traded with a firm but contained tone as geopolitical uncertainty preserved some safe-haven demand. However, the stronger US dollar limited the franc’s upside, while traders remained alert to the Swiss National Bank’s discomfort with excessive currency strength. Next week, CHF will track Middle East headlines, European rate expectations and any SNB commentary on currency conditions.

The Chinese yuan traded cautiously as higher US yields and renewed dollar strength weighed on Asian currencies. Policy management helped limit volatility, but investors remained cautious about China’s domestic momentum and external demand conditions. Next week, CNY will be shaped by Chinese activity data, trade signals, policy guidance and the broader US dollar trend.

The Indian rupee rebounded late in the week after the Reserve Bank of India announced measures aimed at attracting foreign currency inflows and stabilising the currency. The move helped offset some of the pressure caused by high oil prices, equity outflows and broad dollar strength. Next week, INR will be driven by RBI guidance, crude prices, inflation expectations and foreign portfolio flows.

The Australian dollar struggled as stronger US yields and a firmer greenback reduced demand for risk-sensitive currencies. Commodity-linked support helped limit deeper losses, but the Aussie remained exposed to China-related sentiment and shifting global risk appetite. Next week, AUD will depend on Australian data, RBA expectations, Chinese demand signals and the broader tone in global markets.

The New Zealand dollar traded defensively as stronger US data and firmer dollar demand weighed on higher-beta currencies. With limited domestic catalysts, the kiwi remained closely tied to global risk appetite, commodity-market swings and China-related demand signals. Next week, NZD will be guided by domestic confidence data, China signals and whether investors return to risk-sensitive FX.

The Mexican peso held relatively steady compared with some peers, supported by carry demand and Mexico’s still-attractive yield profile. However, stronger US yields and a firmer dollar capped upside, while oil-price volatility and global risk caution kept investors selective across emerging markets. Next week, MXN will track US data, Banxico expectations, oil prices and broader emerging-market flows.