Weekly Currency Update: Canadian Dollar Forecast This Week

The US dollar strengthened through the week as a more hawkish Federal Reserve tone revived expectations that policy may need to remain restrictive for longer. Firm US data and resilient inflation signals reinforced yield support, while setbacks in international negotiations added a layer of caution that supported the greenback. The dollar regained broad traction as investors trimmed expectations for near-term easing. Next week, USD direction will hinge on Federal Reserve guidance, US activity data and whether geopolitical tensions continue to underpin safe-haven demand.

The Canadian dollar came under renewed pressure as falling oil prices eroded a key pillar of support for the commodity-linked currency. The loonie also struggled against a resurgent US dollar, with softer energy markets and cautious risk sentiment amplifying downside pressure. Domestic drivers remained secondary, leaving CAD largely at the mercy of external forces. Next week, CAD will be driven by oil price trends, Canadian inflation data, Bank of Canada expectations and broader US dollar momentum.

The euro weakened as a stronger US dollar and widening rate differentials weighed on the single currency. While energy concerns eased earlier in the month, the shift back toward dollar strength limited EUR upside and kept investors cautious. The absence of fresh hawkish signals from the European Central Bank also reduced support. Next week, EUR will depend on ECB commentary, eurozone inflation data and whether global risk sentiment stabilises.

Sterling softened as renewed US dollar strength overshadowed the UK’s domestic backdrop. While inflation concerns persist in the UK, markets showed limited conviction in further tightening relative to the US, keeping the pound on the defensive. External factors, particularly dollar momentum, remained the dominant driver. Next week, GBP will be guided by UK inflation data, Bank of England signals and shifts in global risk appetite.

The Japanese yen weakened further as rising US yields and a stronger dollar reinforced policy divergence pressures. Despite periodic intervention concerns, the currency remained under sustained downward pressure, with markets continuing to test authorities’ tolerance for weakness. The lack of meaningful tightening signals from the Bank of Japan kept the yen vulnerable. Next week, JPY will depend on US yield movements, BoJ communication and any escalation in intervention rhetoric.

The Swiss franc traded with a mixed tone as safe-haven demand fluctuated amid uneven geopolitical developments. While setbacks in diplomatic negotiations briefly supported defensive flows, the broader strength of the US dollar limited CHF gains. The franc remained sensitive to shifts in risk sentiment rather than domestic drivers. Next week, CHF will track geopolitical headlines, European rate expectations and any guidance from the Swiss National Bank.

The Chinese yuan weakened modestly as a stronger US dollar and higher US yields put pressure on Asian currencies. Authorities continued to manage the currency closely, preventing sharper moves despite external headwinds. Growth concerns and cautious capital flows also weighed on sentiment. Next week, CNY will be shaped by Chinese economic data, policy signals, trade developments and the broader trajectory of the US dollar.

The Indian rupee came under pressure as a stronger US dollar and renewed oil-price volatility weighed on emerging-market currencies. While policy support helped contain excessive weakness, external drivers dominated price action. Elevated crude prices remained a key risk for the currency. Next week, INR will be influenced by oil prices, RBI guidance, inflation trends and foreign investment flows.

The Australian dollar softened as stronger US yields and a resurgent dollar reduced demand for risk-sensitive currencies. Commodity price weakness, particularly in energy markets, also limited support for the Aussie. Caution around China’s growth outlook added to the headwinds. Next week, AUD will depend on domestic data, RBA expectations, China-related developments and global risk sentiment.

The New Zealand dollar weakened alongside other high-beta currencies as the US dollar regained momentum. With limited domestic catalysts, the kiwi remained highly sensitive to global risk appetite and shifting rate expectations. The stronger dollar environment capped any recovery attempts. Next week, NZD will be guided by domestic indicators, China demand signals and broader market sentiment.

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