The Canadian dollar has recovered through the end of this past week, but the single currency has nonetheless been pushed to the brink of a major reversal.

The Canadian dollar continued to pare the advance from the previous month following the flight to safety, and risk trends are likely to dictate price action.

The Canadian dollar tumbled lower on Friday following an unexpected drop in employment, and the currency could face increased selling pressures over the following week as the economic docket is expected to reinforce a weakened outlook for future growth.

During the Bank of Canada rate decision, policy makers stated that they expect economic activity to return to full capacity by the end of next year, which is two quarters later than they expected.

Looking ahead at this week’s rate decision, market participants are sure to keep a close eye on any comments trailing the highly anticipated decision.

The upcoming economic calendar is comparatively light to the past week with International Merchandise trade and leading indicators highlighting.

A dimming outlook for global and U.S. growth has started to cast a shadow on the Canadian economy, which to this point has stood out for its stable banking sector and improving labor market.

The Canadian dollar lost ground against the greenback following a shift in market sentiment and the drop in risk appetite may drag on the exchange rate over the coming week.

The Canadian dollar is likely to face increased volatility over the following week as the economic docket is expected to reinforce an improved outlook for growth and inflation.