Weekly Currency Update: Canadian Dollar Forecast This Week

The US dollar traded with a mixed but broadly defensive tone as investors weighed hopes for a US-Iran resolution against lingering geopolitical risks. Early safe-haven demand faded as markets looked for signs of de-escalation, while expectations for steady Federal Reserve policy kept the greenback from falling too sharply. The dollar also remained sensitive to yen volatility after suspected Japanese intervention. Next week, USD direction will depend on US inflation data, Fed commentary and whether US-Iran negotiations continue to calm energy-market risk.

The Canadian dollar weakened after disappointing jobs data raised doubts about the strength of Canada’s labour market and reduced expectations for Bank of Canada tightening. The loonie underperformed despite oil remaining elevated, as April’s employment loss and a rise in unemployment shifted attention back to domestic growth concerns. USD/CAD moved higher as investors reassessed the policy outlook. Next week, CAD will be driven by Canadian inflation expectations, oil prices, Bank of Canada pricing and developments around the Middle East.

The euro found intermittent support from broad US dollar softness but struggled to build a decisive rally as geopolitical uncertainty and energy risks remained in focus. Europe’s exposure to energy-market swings kept investors cautious, even as hopes for US-Iran diplomacy improved sentiment at points during the week. The single currency remained more dependent on external dollar moves than strong domestic momentum. Next week, euro direction will hinge on eurozone activity data, ECB commentary and whether energy prices stay contained.

Sterling traded with a steadier tone as the pound benefited from pockets of dollar weakness but lacked a strong independent catalyst. Markets remained focused on the Bank of England outlook, with UK growth and inflation risks still complicated by energy-market uncertainty. The pound held up better when risk sentiment improved, though renewed dollar demand capped upside. Next week, GBP will be guided by UK labour and inflation expectations, Bank of England commentary and global risk appetite.

The Japanese yen remained at the centre of FX market attention after suspected intervention helped pull the currency away from deeply weak levels. While the yen gained some support from official action and intervention risk, the underlying backdrop stayed fragile as Japan remained exposed to elevated import costs and a wide policy gap versus the US. Traders remained cautious about testing official tolerance again. Next week, JPY will depend on Japanese policy signals, intervention risk, US yields and energy-market developments.

The Swiss franc held relatively firm as residual geopolitical caution continued to support defensive currencies. However, its upside was contained as market sentiment improved whenever US-Iran diplomacy appeared to gain traction. The franc remained supported, but not aggressively so, as investors balanced safe-haven demand against broader dollar and euro moves. Next week, CHF will track geopolitical headlines, European rate expectations and any fresh guidance from the Swiss National Bank.

The Chinese yuan traded with a steadier tone, helped by broader dollar softness and expectations that the currency could extend its recent resilience. Authorities continued to favour orderly moves, while investors monitored whether improved global sentiment could support Asian FX more broadly. Still, yuan gains remained measured given uncertainty around global demand and capital flows. Next week, CNY will be shaped by Chinese trade data, policy signals, activity indicators and the wider direction of the US dollar.

The Indian rupee remained sensitive to swings in oil and the US dollar, with elevated energy prices keeping pressure on India’s external outlook. Softer dollar episodes offered some relief, but importer demand and caution across emerging-market currencies limited the rupee’s recovery. The currency remained vulnerable to any renewed rise in crude prices. Next week, INR will be driven by oil prices, RBI signals, inflation expectations and foreign portfolio flows.

The Australian dollar traded cautiously as risk sentiment shifted with Middle East headlines and broader US dollar moves. The Aussie found support when investors leaned into hopes of de-escalation, but renewed caution and uncertainty over China-linked demand limited follow-through. The currency remained highly sensitive to global growth expectations. Next week, AUD will be driven by Chinese data, commodity prices, RBA expectations and the broader risk tone.

The New Zealand dollar followed the broader risk-sensitive currency complex, gaining support when the US dollar softened but struggling when geopolitical uncertainty returned. With limited domestic catalysts, the kiwi remained more exposed to global sentiment than local fundamentals. Concerns about external demand and cautious central-bank expectations kept gains contained. Next week, NZD will depend on business confidence, China-related signals and whether global markets remain comfortable taking risk.

The Mexican peso remained relatively resilient, supported by carry demand and a weaker US dollar during parts of the week. However, upside was limited by uneven global risk appetite and ongoing sensitivity to US data and geopolitical headlines. The peso continued to trade as a higher-yielding currency that benefits when volatility eases but remains vulnerable when defensive dollar demand returns. Next week, MXN will track US inflation, Banxico expectations, oil prices and emerging-market flows.