Weekly Currency Update: Canadian Dollar Forecast This Week

The US dollar held near a six-week high as uncertainty around a US-Iran deal, sticky inflation risks and firm rate expectations kept demand for the greenback elevated. Safe-haven flows remained supportive, while markets continued to debate whether energy-driven inflation could force the Federal Reserve to stay restrictive for longer. Next week, USD direction will depend on US inflation signals, Fed commentary and whether Middle East tensions ease or intensify.

The Canadian dollar fell for a third straight week as higher gasoline prices weighed on consumer spending and softer inflation reduced expectations for further Bank of Canada tightening. Retail sales rose in value terms, but weaker volumes suggested households remain under pressure from elevated costs. Next week, CAD will be driven by Canadian GDP, oil prices, Bank of Canada pricing and any fresh geopolitical developments affecting crude.

The euro remained under pressure as dollar strength and the Iran-war risk premium weighed on major currencies. Europe’s exposure to energy-market disruption kept investors cautious, with higher oil prices threatening both inflation and growth. Next week, EUR will depend on eurozone inflation data, ECB commentary and whether geopolitical risks continue to support the US dollar.

Sterling softened as weaker UK consumer spending and worsening public finances added to pressure from broad US dollar strength. The pound remained vulnerable to domestic growth concerns, even as markets continued to assess whether inflation risks could limit Bank of England flexibility. Next week, GBP will be guided by UK data, Bank of England signals, fiscal headlines and global risk appetite.

The Japanese yen stayed weak as rising US yields and broad dollar demand overshadowed intervention concerns. Markets remained alert to official action as yen weakness continued to raise imported inflation risks for Japan. Next week, JPY will depend on Tokyo’s intervention rhetoric, Japanese inflation data, Bank of Japan expectations and US yield direction.

The Swiss franc remained supported by defensive demand, but the stronger US dollar limited its upside. Persistent geopolitical uncertainty kept CHF relevant as a safe-haven currency, although traders remained mindful of the Swiss National Bank’s discomfort with excessive appreciation. Next week, CHF will track geopolitical headlines, European rate expectations and any SNB comments on currency strength.

The Chinese yuan traded cautiously as higher US yields and global risk aversion weighed on Asian currencies. While Beijing’s managed approach helped contain volatility, the broader regional backdrop remained pressured by oil-shock concerns and dollar strength. Next week, CNY will be shaped by Chinese activity data, trade signals, policy guidance and the wider US dollar trend.

The Indian rupee remained under pressure as higher oil prices revived concerns about India’s import bill and inflation outlook. Broader weakness across Asian currencies and firmer US rate expectations added to the headwinds. Next week, INR will be driven by crude prices, RBI signals, inflation expectations and foreign portfolio flows.

The Australian dollar struggled as stronger US yields and cautious global sentiment reduced demand for risk-sensitive currencies. Commodity support helped limit deeper losses, but China-linked uncertainty and broad dollar strength kept the Aussie on the defensive. Next week, AUD will depend on Australian data, RBA expectations, China sentiment and broader risk appetite.

The New Zealand dollar traded defensively as risk sentiment softened and the US dollar stayed firm. With limited domestic catalysts, the kiwi remained exposed to global growth concerns, commodity-market swings and China-related demand signals. Next week, NZD will be guided by business confidence, China data and whether investors regain appetite for higher-beta currencies.

The Mexican peso held relatively steady compared with several peers, supported by carry demand, but upside was capped by stronger US yields and a firmer dollar. Emerging-market sentiment remained cautious as investors weighed inflation risks, oil volatility and geopolitical uncertainty. Next week, MXN will track US data, Banxico expectations, oil prices and broader emerging-market flows.