Canada’s Ivey Purchasing Managers Index (seasonally adjusted) was 57.7 in April. The forecast was 49.9.
A reading above 50 indicates growth in economic activity. A reading below 50 indicates contraction.
Implications For Growth And Policy
The strong April Ivey PMI data suggests the Canadian economy has unexpected momentum, directly challenging our view of a potential slowdown. This surprise beat forces a reassessment of Bank of Canada (BoC) policy expectations. The market must now consider the possibility that interest rates will remain higher for longer.
We should look at positioning for a stronger Canadian dollar, which has been hovering near 1.37 against the USD. The combination of this strong domestic data and West Texas Intermediate oil prices holding above $82 a barrel provides a solid foundation for CAD appreciation. This setup is reminiscent of the sharp CAD rally we saw in mid-2025 following a series of robust employment reports.
Interest rate derivative markets will need to reprice BoC expectations for the coming months. Before this data, overnight index swaps were pricing in a nearly 40% chance of a rate cut by the July meeting. We now expect that probability to fall significantly, making it prudent to consider positions that benefit from higher short-term rates.
This economic strength should be a tailwind for Canadian equities, particularly the S&P/TSX 60 index. We can use call options on the XIU ETF to gain bullish exposure, as the index has been trading in a tight range just below its all-time highs. A breakout seems more likely now, especially for domestic-focused sectors like financials and industrials.
