Catenaa, January 26, 2026 The Canadian dollar recorded its biggest weekly gain since May, rallying 1.5% against the U.S. dollar as global investors shifted away from the greenback amid broad geopolitical uncertainty and renewed risk appetite.
On Friday, the loonie traded at 1.3715 per U.S. dollar, up 0.5% on the day, reaching its strongest level since early January. Analysts attributed the move primarily to U.S. dollar weakness rather than Canadian-specific momentum.
Aaron Hurd, senior portfolio manager at State Street Global Advisors, said, “This is a dollar weakness story, not loonie strength.” Still, Canadian data offered some support. November retail sales rose 1.3% month over month, and annualised growth stood at 3.1%, easing concerns of a consumer slowdown.
Oil prices, a key Canadian export, also rallied nearly 3% amid fears of Middle East supply disruptions, providing tailwinds for the commodity-linked currency. Meanwhile, Canadian bond yields rose across the curve, with the 10-year yield hitting 3.44%, mirroring moves in U.S. Treasuries.
Market attention is turning to upcoming USMCA trade talks and political risks surrounding the July 1 renewal deadline. Recent comments from U.S. President Trump have raised concerns about potential trade tensions, though Canadian Prime Minister Mark Carney’s firm stance has bolstered domestic political support.
Despite the loonie’s recent strength, most economists expect the Bank of Canada to hold rates steady through 2026, with inflation expected to remain in check and growth moderately stable.
While short-term gains reflect external factors, sustained appreciation in the Canadian dollar may require stronger domestic growth drivers in the months ahead.
