Weekly Currency Update: Canadian Dollar Forecast This Week

The US dollar traded with a softer bias through the week as cooling labour market signals and easing inflation expectations tempered the more hawkish Federal Reserve narrative. While policy remained restrictive, markets began to price a slower pace of tightening, reducing yield support for the greenback. Improved global risk sentiment also weighed on safe-haven demand. Next week, USD direction will hinge on US inflation data, Federal Reserve commentary and whether growth indicators continue to soften.

The Canadian dollar regained some stability after recent weakness, supported by a modest recovery in oil prices and a softer US dollar backdrop. While gains were limited, the loonie showed resilience as energy markets steadied and broader sentiment improved. However, caution around domestic growth and Bank of Canada expectations capped upside momentum. Next week, CAD will be driven by oil price direction, Canadian inflation data and broader US dollar trends.

The euro strengthened modestly as the US dollar softened and energy market pressures remained contained. While growth concerns persisted across the eurozone, reduced volatility in oil prices supported sentiment. The European Central Bank’s steady stance kept the currency stable, though gains were measured. Next week, EUR will depend on eurozone inflation data, ECB communication and shifts in global risk appetite.

Sterling edged higher as improved global sentiment and a softer US dollar provided support. The pound also benefited from relatively stable UK data, though underlying growth concerns persisted. Markets remained cautious on the Bank of England outlook, limiting stronger gains. Next week, GBP will be guided by UK labour and inflation data, fiscal signals and broader market sentiment.

The Japanese yen remained under pressure despite some easing in US yields, as policy divergence with the Federal Reserve continued to weigh on the currency. While calmer conditions reduced volatility, the yen struggled to recover meaningfully. Markets remained alert to potential intervention signals. Next week, JPY will depend on US yield trends, domestic inflation data and any escalation in intervention rhetoric.

The Swiss franc traded with a slightly softer tone as improving risk sentiment reduced demand for safe-haven currencies. While the franc retained its defensive appeal, broader market conditions favoured higher-yielding assets. Next week, CHF will track geopolitical developments, European data and any guidance from the Swiss National Bank.

The Chinese yuan traded in a narrow range as authorities continued to manage volatility amid mixed economic signals. While a softer US dollar provided some support, concerns around domestic growth and trade dynamics limited upside. Next week, CNY will be shaped by Chinese economic data, policy signals and global trade developments.

The Indian rupee stabilised as softer oil prices and improved risk sentiment supported emerging-market currencies. While external pressures remained, easing crude prices helped reduce downside risks. Next week, INR will be influenced by oil prices, inflation data, RBI guidance and foreign investment flows.

The Australian dollar strengthened modestly as improved global sentiment and a softer US dollar supported demand for risk-sensitive currencies. Stabilising commodity prices also provided a supportive backdrop, though concerns around China’s growth outlook capped gains. Next week, AUD will depend on domestic data, RBA expectations, China developments and global risk appetite.

The New Zealand dollar edged higher alongside other high-beta currencies as risk sentiment improved and the US dollar softened. Gains remained moderate, reflecting cautious global growth expectations. Next week, NZD will be guided by domestic indicators, China demand signals and broader market sentiment.

The Mexican peso firmed as improved risk appetite and a softer US dollar supported emerging-market currencies. Carry demand remained a key driver, helping offset external uncertainty. Next week, MXN will track US economic data, Banxico expectations, oil prices and global capital flows.