Canada’s building permits rose 6.8% month-on-month in December. That was above the expected 5% increase.
The report shows a stronger monthly gain than forecast. No additional details were included in the update.
This strong December 2025 building permits reading suggests the Canadian economy had more momentum going into the new year than we first thought. Strength in the housing pipeline is something the Bank of Canada watches closely. It makes an early rate cut in March or April much less likely.
We should look at options on CORRA futures and price in a lower chance of a rate cut before summer. January 2026 CPI also supports this view, with core inflation still high at 3.1%. That points to a patient Bank. This feels similar to 2023, when resilient data repeatedly pushed markets to delay their rate-cut expectations.
A more hawkish Bank of Canada is bullish for the loonie, especially with oil holding above $85 WTI. We should consider buying USDCAD put options or using put spreads to benefit from potential CAD strength. The latest Commitment of Traders data already shows speculative net CAD shorts have fallen for three straight weeks.
For equities, this sets up a two-way derivatives trade. The data—along with the stronger-than-expected January 2026 jobs report (+45,000)—supports buying calls on construction materials ETFs. On the other hand, a “higher for longer” rate outlook pressures rate-sensitive sectors, so puts on Canadian REIT ETFs look like an attractive hedge.
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