Weekly Currency Update: Canadian Dollar Forecast This Week

The US dollar traded in a more mixed but ultimately softer pattern as weaker-than-expected US labour data tempered expectations for further Federal Reserve tightening. While the broader “higher-for-longer” narrative remained intact, softer job creation reduced some of the dollar’s yield advantage. A fragile easing in geopolitical tensions also weighed on safe-haven demand at times. Next week, USD direction will hinge on Federal Reserve minutes, inflation expectations and whether incoming growth data confirms a slowing trend.

The Canadian dollar struggled to gain traction as lower oil prices continued to erode support for the commodity-linked currency. While global sentiment improved intermittently, the loonie remained pressured by softer crude and a still-resilient US dollar environment. External drivers dominated, keeping USD/CAD elevated despite occasional pullbacks. Next week, CAD will be driven by oil price direction, Canadian employment data and broader US dollar momentum.

The euro found modest support late in the week as the US dollar softened, though gains were limited by cautious growth sentiment and easing energy pressures. Reduced urgency for aggressive ECB tightening kept upside contained. Next week, EUR will depend on eurozone industrial data, ECB communication and energy market stability.

Sterling firmed slightly as a softer US dollar and improved political stability provided support, though gains were capped by signs of slowing UK growth. The pound remained sensitive to global sentiment rather than domestic drivers. Next week, GBP will be guided by UK activity data, fiscal developments and overall risk appetite.

The Japanese yen remained volatile, with intermittent support from softer US yields offset by ongoing policy divergence pressures. Markets remained alert to potential intervention signals as the currency hovered near sensitive levels. Next week, JPY will depend on US yield movements, Tokyo inflation data and any escalation in intervention rhetoric.

The Swiss franc softened slightly as reduced geopolitical stress lowered demand for safe-haven currencies. However, underlying caution in global markets limited downside. The franc remained driven primarily by external sentiment. Next week, CHF will track geopolitical developments, European data and SNB commentary.

The Chinese yuan weakened modestly as broader US dollar dynamics and ongoing domestic growth concerns weighed on sentiment. Authorities maintained tight control over volatility through policy measures. Next week, CNY will be shaped by PMI data, policy signals and global trade developments.

The Indian rupee weakened as softer oil prices provided limited relief while broader US dollar dynamics and capital flow trends weighed on emerging markets. External drivers remained dominant. Next week, INR will be influenced by crude prices, RBI guidance and inflation data.

The Australian dollar softened as weaker global growth sentiment and commodity price softness weighed on risk-sensitive currencies. While late-week USD weakness offered limited relief, the broader tone remained cautious. Next week, AUD will depend on domestic data, China developments and global risk appetite.

The New Zealand dollar traded with a weaker bias as global growth concerns and shifting rate expectations weighed on high-beta currencies. The kiwi remained closely tied to broader market sentiment. Next week, NZD will be guided by domestic indicators, China demand signals and global risk trends.

The Mexican peso softened as weaker oil prices and fluctuating risk sentiment weighed on emerging markets. While carry demand provided some support, broader US dollar dynamics kept the currency on the defensive. Next week, MXN will track US data, Banxico expectations, oil prices and capital flows.