Canada’s seasonally adjusted housing starts in February were 250.9K. The forecast was 252.5K.
This result was 1.6K below the forecast. The figures are reported on a year-on-year basis.
The slight miss in February’s housing starts, coming in at 250.9K against a 252.5K forecast, suggests a subtle cooling in the construction sector. While not a dramatic drop, it is a data point that nudges the needle towards a less aggressive monetary policy outlook. For us, this challenges the view that the economy is running too hot.
We must view this in the context of recent inflation figures, which clocked in at 2.8% for January, still above the Bank of Canada’s target. However, with the latest jobs report also showing a slowdown, adding only 15,000 jobs, this housing data adds to a growing narrative of a softening economy. The Bank will find it harder to justify any further rate hikes with this trend emerging.
Looking back at 2025, the housing market showed remarkable strength, consistently beating expectations as interest rates stabilized. This makes the February 2026 miss, though minor, more significant as it could be the first sign that the momentum from last year is waning. It signals a potential shift that we have been watching for.
In response, we see an opportunity in interest rate derivatives that anticipate the Bank of Canada holding its policy rate steady. Traders should consider positions that benefit from rates remaining stable or declining over the next quarter. This could involve using options on CORRA futures to bet against a rate hike this summer.
This dovish data point also puts downward pressure on the Canadian dollar. Consequently, speculating on a weaker loonie appears prudent in the coming weeks. Options strategies that favour a higher USD/CAD exchange rate could offer value as rate expectations between the U.S. and Canada diverge.
Sectors sensitive to housing, such as Canadian banks and real estate investment trusts, may face headwinds. We believe buying protective put options on ETFs that track these sectors could be a wise move. This allows for managing risk from a potential slowdown in the housing-related economy.
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