Weekly Currency Update: Canadian Dollar Forecast This Week

The US dollar traded with a firm tone through the week as markets leaned into a more hawkish Federal Reserve outlook following resilient US data and steady inflation signals. While risk sentiment improved intermittently, the greenback continued to draw support from elevated US yields and relative economic outperformance. Geopolitical developments remained mixed, limiting any sustained unwind of defensive positioning. Next week, USD direction will hinge on core PCE inflation, Federal Reserve commentary and whether global risk sentiment continues to stabilise.

The Canadian dollar remained under pressure as softer oil prices and a stronger US dollar continued to weigh on the commodity-linked currency. While crude attempted to stabilise, the loonie struggled to regain traction amid persistent external headwinds and cautious Bank of Canada expectations. USD/CAD remained elevated as energy-driven support faded. Next week, CAD will be driven by oil price direction, Canadian GDP data, BoC signals and broader US dollar momentum.

The euro traded with a slightly softer bias as widening rate differentials and a firm US dollar limited upside attempts. While easing energy price volatility offered some relief, the single currency remained constrained by cautious growth expectations and a lack of fresh hawkish catalysts from the European Central Bank. Next week, EUR will depend on eurozone inflation data, ECB commentary and shifts in global risk appetite.

Sterling edged lower as stronger US dollar dynamics overshadowed the UK’s domestic backdrop. While inflation remains a key concern in the UK, markets showed limited conviction in additional tightening relative to the US, keeping the pound under pressure. Political and fiscal uncertainty also lingered in the background. Next week, GBP will be guided by UK GDP data, Bank of England signals and broader global sentiment.

The Japanese yen remained on the defensive as elevated US yields and persistent policy divergence continued to favour the dollar. Despite periodic speculation around intervention, the currency struggled to mount a sustained recovery. Market participants remained alert to any signals from Japanese authorities, particularly as USD/JPY hovered near sensitive levels. Next week, JPY will depend on US yield trends, Tokyo CPI data and any escalation in intervention rhetoric.

The Swiss franc softened modestly as demand for safe-haven currencies eased in periods of improved risk sentiment. However, the broader strength of the US dollar capped CHF upside and kept the currency trading with a weaker bias overall. The franc continued to respond more to external dynamics than domestic drivers. Next week, CHF will track geopolitical developments, European data and any commentary from the Swiss National Bank.

The Chinese yuan weakened slightly as a stronger US dollar and ongoing concerns around domestic growth weighed on sentiment. Authorities maintained a steady hand, limiting volatility through daily fixings and liquidity management. External pressures remained the dominant driver. Next week, CNY will be shaped by Chinese PMI data, policy signals, trade developments and the broader US dollar trend.

The Indian rupee traded with a softer tone as a stronger US dollar and fluctuating oil prices weighed on emerging-market currencies. While underlying fundamentals remained stable, external pressures dominated price action. The Reserve Bank of India was seen smoothing volatility, preventing sharper moves. Next week, INR will be influenced by crude oil prices, inflation data, RBI guidance and foreign investment flows.

The Australian dollar weakened as stronger US yields and a firm dollar reduced demand for risk-sensitive currencies. Commodity price softness and cautious sentiment toward China’s growth outlook also limited support for the Aussie. Despite occasional rebounds, the broader tone remained defensive. Next week, AUD will depend on Australian inflation data, RBA expectations, China-related developments and global risk appetite.

The New Zealand dollar traded with a weaker bias as US dollar strength and cautious global sentiment weighed on higher-beta currencies. With limited domestic catalysts, the kiwi remained closely tied to broader risk trends and shifting rate expectations. Next week, NZD will be guided by domestic business confidence data, China demand signals and overall market sentiment.

The Mexican peso softened as stronger US yields and a firm dollar reduced appetite for carry trades. While Mexico’s yield advantage continued to provide some support, external pressures dominated, keeping the currency on the defensive. Oil price volatility also contributed to cautious positioning. Next week, MXN will track US economic data, Banxico expectations, oil prices and broader emerging-market flows.