Canada’s GDP grew by 2.6% in the third quarter, much higher than the expected 0.5%. This indicates a stronger economy than anticipated, showing resilience in economic performance. Market analysts will likely look into how this information affects monetary policy and the overall economic outlook. This unexpected growth could influence the Bank of Canada’s decisions about interest rates and economic strategies in the future.

Economic Impact and Policy Shifts

Future updates and analyses will help us understand how this data impacts market dynamics and forecasts for the Canadian economy. With the surprising 2.6% GDP growth reported today, November 28, 2025, we have adjusted our expectations for the Bank of Canada’s upcoming policies. This suggests an economy that is performing better than previously believed. The focus is now on the Bank’s interest rate decision set for December 10th, where the likelihood of maintaining a hawkish stance has increased significantly. We should now consider a lower chance of rate cuts in the first half of 2026. The recent CPI data from October shows persistent inflation at 3.1%, and this GDP report gives the Bank of Canada a reason to keep rates higher to bring inflation back to its 2% target. Traders in interest rate derivatives should think about strategies that would benefit from prolonged higher rates. This economic strength is positive news for the Canadian dollar. The last Labour Force Survey released in early November already showed a strong job market with a low unemployment rate of 5.4%, and this GDP figure adds to that strength. We expect increased interest in CAD call options, especially compared to currencies from countries with slower economies.

Market Dynamics and Volatility

The outlook for equity derivatives is mixed, suggesting a favorable environment for strategies focused on volatility. While strong growth benefits corporate earnings, the potential for higher interest rates for an extended period could pressure stock valuations. We anticipate rising implied volatility in options related to the S&P/TSX 60 index as the market reacts to these conflicting factors. We’ve experienced this pattern before, especially in 2022, when stronger-than-expected economic data led central banks worldwide to quickly shift from a dovish to a hawkish approach. That period showed us that markets can react sharply based on just a few key data points. Therefore, we should be ready for increased volatility in Canadian assets in the coming weeks. Create your live VT Markets account and start trading now.

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