Canada’s New Housing Price Index rose by 0.3% month on month in February. The forecast was a fall of 0.3%.
This is a 0.6 percentage point difference from expectations. The data point is reported as month-on-month.
This surprisingly strong housing number fundamentally challenges the view that the Bank of Canada will cut rates soon. We are seeing an immediate repricing in derivatives that track interest rate expectations, like the Canadian Overnight Repo Rate Average futures. Traders should anticipate that bets on a rate cut before the summer of 2026 will quickly be unwound.
This data should provide a strong tailwind for the Canadian dollar, especially against the US dollar. Looking back at 2025, we saw the CAD weaken as our economy showed signs of slowing faster than the U.S. Now, with swaps markets likely pricing out at least one full rate cut for this year, we should consider buying CAD call options or selling USD/CAD futures to position for a stronger loonie.
For the S&P/TSX 60 index, the path is less clear and warrants a more cautious options strategy. While a resilient economy is good for our banks and resource companies, the prospect of higher-for-longer interest rates will be a headwind for growth and real estate sectors. This is especially true given that Canadian household debt-to-income levels were already elevated above 175% at the end of 2025, making the economy very sensitive to borrowing costs.
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