Canada’s Bank of Canada Consumer Price Index Core (MoM) fell to -0.1% in November, down from 0.6% the month before. This drop shows that consumer price growth is slowing down. In currency news, GBP/USD neared 1.3400, as traders expect a rate cut from the Bank of England. The EUR/USD traded close to multi-week highs, supported by a weaker US Dollar and a cautious Federal Reserve outlook.

Canadian Housing Market and Trading

In Canada, home sales stayed steady in November, indicating stability in the housing market. Meanwhile, Solana’s price stayed above $131 due to strong institutional demand, pushing nearly $1 billion into spot ETFs. Gold traded around $4,300, influenced by cautious market sentiment. The S&P 500 gained ground following a Federal Reserve rate cut, primarily benefiting non-tech sectors. FXStreet reminds readers that investing carries risks and this content is not investment advice. It’s important to do your own research before making any financial decisions. Information shared may not be completely accurate or timely.

Canadian Core Inflation and Economic Impact

The unexpected drop in Canada’s core inflation to -0.1% month-over-month is significant. This sharp decline from the prior 0.6% indicates that the Bank of Canada has effectively reduced price pressures. This increases the likelihood of an interest rate cut in the first quarter of 2026. This trend of disinflation aligns with other data, showing annual CPI fell to 2.3% in November, moving closer to the central bank’s 2% target. The labor market is also softening, with the national unemployment rate recently rising to 6.1%. This mixture of cooling inflation and a weaker economy puts pressure on the Bank of Canada to take action. For rate traders, we can expect a shift downwards in the Canadian yield curve. We think that traders can prepare for the BoC’s next meeting in late January using derivatives like Bankers’ Acceptance futures (BAX). Long positions in these instruments could profit from an anticipated cut in the overnight rate. In the foreign exchange market, this difference in policy compared to the US Federal Reserve is likely to affect the Canadian dollar. Given the Fed’s cautious stance, a BoC rate cut could push the USD/CAD exchange rate higher. It’s worthwhile to consider buying USD/CAD call options to take advantage of the expected weakness in the loonie. This situation also benefits Canadian equities, as lower borrowing costs could boost corporate profits. A rate cut might spark a rally in the S&P/TSX 60 index, which has lagged throughout 2025. We suggest that traders think about buying call options on broad Canadian stock market ETFs to position themselves for this potential increase. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now