In December, Canada’s employment insurance claimants rose 0.4% month on month, slowing from 1.6% previously
Canada’s month-to-month change in Employment Insurance (EI) beneficiaries slowed to 0.4% in December, down from 1.6% in the prior month.
This suggests the number of people receiving EI benefits is still rising, but at a slower pace than before. No additional details or breakdowns were included in the update.
In December, Canada’s merchandise trade deficit narrowed to $1.3B, beating expectations of a $2.1B shortfall
Canada’s international merchandise trade balance posted a deficit of **$-1.3B** in December. This was better than the forecast of **$-2.1B**.
That means the deficit was **$0.8B smaller** than expected. In simple terms, exports and imports were closer than markets had projected.
Implications For Canadian Markets
The stronger-than-expected trade result for December 2025 is a positive signal for Canada as we move into this year. A smaller deficit points to firmer economic activity than many investors had priced in. This may be a reason to revisit overly bearish positioning in Canadian assets. For FX traders, the data is supportive for the Canadian dollar. The CAD has already strengthened to about **1.33 per USD**, and this report could add momentum by pushing back against the “slowing economy” narrative. One way to express this view is to consider **short-dated CAD call options** for potential near-term upside. This also reduces the odds of an imminent Bank of Canada rate cut from the current **3.5%** policy rate. Markets had been leaning toward a cut by June, but with January inflation still at **2.8%**, the trade data adds support for the BoC to stay on hold. Pricing in interest rate swaps that assumes a near-term cut may now look too aggressive. The stronger fourth quarter of 2025 likely reflected firm commodity pricing, with Western Canadian Select oil averaging above **$70 per barrel**. If this holds, it should keep export values supported. That backdrop strengthens the case for derivatives linked to Canadian energy and the **S&P/TSX 60**.Positioning And Volatility Considerations
A similar setup occurred in 2023, when stronger Canadian data led to a fast repricing of rate expectations versus the U.S. Federal Reserve. With that precedent, higher volatility in the weeks ahead is plausible. An options approach designed for a **range-bound but volatile USD/CAD** environment may be a practical way to position. Create your live VT Markets account and start trading now.Canadian export values rose to $65.63B from $63.94B in December as overseas demand improved
Canada’s exports rose to $65.63B in December, up from $63.94B in the previous period. That’s an increase of $1.69B.
This increase points to stronger export values to close out the year. The data compares December’s total with the prior reported period.
A new report shows Canadian exports increased to $65.63B in December 2025. This is a positive sign for the Canadian economy. It beat expectations and suggests that economic strength is carrying into the new year. That strength should also support demand for the Canadian dollar.
Strong exports, along with January inflation at 2.9%, makes the Bank of Canada outlook less clear. In our view, it lowers the chance of an interest rate cut in the first half of 2026. Markets may now start to price in rates staying higher for longer.
For currency derivatives, we would expect downward pressure on USD/CAD. The pair has been trading near 1.3450. This news could push it toward the 1.3300 support level seen last autumn in 2025. Consider put options on USD/CAD with expiries in late March or April.
In interest rate markets, this data is a warning for traders positioned for near-term rate cuts. Short-term pricing could shift, including in Canadian Overnight Repo Rate Average (CORRA) futures. This may be a good time to hedge against the risk that the Bank of Canada stays more hawkish at its next meeting.
A similar pattern appeared in the second half of 2024. Strong jobs and trade data repeatedly forced markets to delay expected rate cuts. That period saw a firmer Canadian dollar and more volatility in short-term bond yields. Today’s setup is starting to look similar.
The next key catalyst is the Bank of Canada meeting in early March. We will watch their wording closely for any sign they are recognizing this resilience. Until then, positioning may still favor a stronger Canadian dollar and “higher for longer” domestic interest rates.
Canada’s imports totalled $66.93B in December, up from $66.14B the previous month.
Canada’s imports were $66.93 billion in December. This compares with $66.14 billion in the previous period.
The increase to $66.93 billion suggests solid domestic demand going into the new year. That points to a Canadian economy that may be more resilient than expected, which could affect how the Bank of Canada thinks about policy. It also pushes back on the idea of a fast-cooling economy that shaped much of the second half of 2025.
With that in mind, we should look at trades that benefit from a stronger Canadian dollar. The USD/CAD rate has been stable near 1.34, but that may not hold if the economy stays strong—especially since the January 2026 jobs report showed unemployment steady at a low 5.1%. Traders could consider buying CAD call options or selling out-of-the-money puts on USD/CAD to position for a move lower in the pair.
This data also changes the outlook for interest rate derivatives. Markets had been pricing possible Bank of Canada rate cuts in summer 2026, but continued strength makes that less certain. To position for “higher for longer” rates, we could look at options on CORRA futures that benefit if the central bank delays easing.
For equities, this points to ongoing support for Canadian consumer-focused companies. Many retailers gave cautious guidance in late 2025, and the import data may hint at better-than-expected results ahead. Call options on the S&P/TSX Capped Consumer Discretionary Index, or on specific large-cap retail names, could be a practical way to gain exposure.
US continuing jobless claims rose above forecasts to 1.869 million vs 1.86 million, signalling labour market weakness in February
US continuing jobless claims for the week ending 6 February came in at 1.869 million.
This was slightly above the expected level of 1.86 million.
Labor Market Signals Cooling
The rise in continuing jobless claims to 1.869 million is worth watching. It may be an early sign that the labor market is starting to cool, which matters because jobs data is a key input for monetary policy. On its own, this report supports the idea that the economy could be slowing. This jobs data clashes with the early-February inflation report, which showed annual CPI was higher than expected at 3.2%. That leaves markets stuck between two forces: a softer labor market that supports rate cuts, and sticky inflation that argues for keeping rates steady. This push-and-pull is a major reason implied volatility could stay elevated in the weeks ahead. For trading, this setup supports strategies that can benefit from a large move in either direction. Long-volatility positions—such as SPX straddles—may be worth considering ahead of the March FOMC meeting. With the market divided, any major data release could spark a sharp price move. Looking back at 2025, mixed economic signals often led to choppy, range-bound trading instead of clean trends. In those periods, traders who held options premium often did better than traders trying to pick a direction. Today’s backdrop feels similar to what we saw last fall. Rate markets are already adjusting to this claims figure. Fed Funds futures now imply a 65% chance of a rate cut by the May meeting, up from 50% last week. That shift can also make options on Treasury futures a compelling way to express a view on the Fed’s next move.Rates Market Repricing Expectations
Create your live VT Markets account and start trading now.In January, Canada’s monthly new housing price index fell 0.4%, missing the 0.1% forecast
Canada’s New Housing Price Index fell **0.4%** month over month in January. This was below the expected **0.1% increase**.
The data shows new home prices were lower than the month before. It also came in weaker than January forecasts.
The **-0.4%** drop was a large miss versus expectations. It suggests high interest rates are starting to hurt demand. This unexpected weakness in a major sector increases pressure on the Bank of Canada to cut rates sooner than expected. We now see a higher chance of a rate cut before the summer.
This outlook is bearish for the Canadian dollar. If rates fall, the currency often becomes less attractive to foreign investors. We see an opportunity in **buying USD/CAD call options**, aiming for a move toward **1.3800** in the coming weeks. This view is supported by Canada’s latest inflation data for January 2026, which eased to **2.8%** and strengthens the case for the Bank to act.
Traders should also watch interest rate derivatives that reflect expectations for the Bank of Canada’s policy rate. Positioning for lower yields ahead of the **March 5** central bank meeting could pay off. Looking back at 2025, this would be a clear shift from the Bank’s hawkish stance that year, when it kept rates unchanged to fight stubborn inflation.
Housing weakness often comes before a wider slowdown. It can also weigh on Canadian banks and real estate-linked stocks. We are considering **put options on financial sector ETFs** as a hedge against declines in these rate-sensitive names. This fits with recent CMHC data showing housing starts fell **more than 10% year over year** in the final quarter of 2025, suggesting the slowdown is not a one-off.
America’s goods trade deficit widened to $99.3B in December, up from $86.9B previously
The U.S. goods trade balance fell to $-99.3B in December, from $-86.9B in the prior period.
This means the goods trade deficit widened by $12.4B between the two periods.
Dollar Outlook And Trade Deficit
The wider goods trade deficit in December 2025, now at $-99.3B, is a clear negative for the U.S. dollar. A bigger deficit means more dollars leaving the country to pay for imports, which can put downward pressure on the currency. Because of this, we are looking at short U.S. dollar ideas, such as put options on the USD index or call options on the EUR/USD pair. This trade report, which is likely to weigh on Q4 2025 GDP, comes as other data also points to a weaker economy. The Commerce Department’s January 2026 retail sales report showed an unexpected 0.8% drop, adding to signs that the U.S. consumer is slowing. As a result, we are considering protective puts on broad market indices like the S&P 500, in case companies guide earnings lower. With growth cooling, it becomes harder for the Federal Reserve to keep its current stance. Markets are already adjusting: the 10-year Treasury yield fell to 3.75% this week as traders increased the odds of a rate cut by summer. In that environment, long positions in Treasury note futures may benefit from shifting rate expectations.Volatility Hedge And Historical Parallel
We saw a similar setup in Q2 2025. A surprise rise in the trade deficit came before two straight months of weaker manufacturing PMI readings. That stretch also brought a jump in market volatility. Given the current backdrop, it may be sensible to consider call options on the VIX as a hedge against rising uncertainty in the weeks ahead. Create your live VT Markets account and start trading now.US wholesale inventories rose 0.2% in December, matching analysts’ expectations and keeping stock levels steady across industries
US wholesale inventories rose by 0.2% in December, matching forecasts.
This report covers inventories held by US wholesalers and shows the change from the prior month.
Wholesale Inventories Match Expectations
The update did not include any other figures. It also gave no breakdown by sector or category. Because the data came in exactly as expected, it removes a possible market surprise. It supports the view of an economy that is steady, but not speeding up, as we enter the first quarter of 2026. That may mean implied volatility on major indices is a bit high, which can favor strategies designed for range-bound markets. This result also gives the Federal Reserve little reason to shift its data-driven approach, especially after the latest January CPI report showed inflation easing to 2.8%. Markets should not expect sudden rate moves, which can make trades that assume a continued, gradual decline in rate volatility more appealing. Overall, it supports positioning for a calmer market in the weeks ahead. Inventory stability also lines up with January retail sales, which came in slightly below expectations. Together, these signals suggest the consumer is still spending, but with more caution. That could limit near-term upside for corporate earnings. In this setting, aggressive out-of-the-money call buying on broad market ETFs looks like a lower-probability trade.Volatility Strategies In A Stable Backdrop
For context, the large inventory builds in late 2024 came before the economic slowdown in the first half of 2025. By contrast, today’s modest and predictable increase suggests businesses are managing supply chains more efficiently. That lowers the risk of a sudden downturn, which can make long-dated protective puts feel less urgent. With the VIX around 17, strategies that benefit from time decay and lower volatility may fit the current environment. One approach is selling premium on sector ETFs that do not have a clear near-term catalyst for a major breakout. The focus is on continued stability, not a big directional move. Create your live VT Markets account and start trading now.US initial jobless claims four-week average slips to 219K from 219.5K on February 13
The four-week average for initial jobless claims in the United States fell to 219,000 in the week ending 13 February. The prior reading was 219,500.
The latest claims report shows the four-week average still near record lows at 219,000. This points to a very tight labor market. That strength likely keeps the Federal Reserve from cutting rates anytime soon. For traders, it supports the “higher for longer” rate view.
Labor Market And Inflation Keep Fed Restrictive
This labor strength comes alongside the January Consumer Price Index report, which showed inflation running at a 3.2% annual rate—still well above the Fed’s 2% target. Together, a strong job market and sticky inflation support the case for the Fed to keep policy restrictive going into the March meeting. We should not expect any dovish surprises. This setup looks a lot like much of 2025, when markets repeatedly priced in rate cuts, only to be proven wrong by strong economic data. The current numbers suggest the same pattern may continue, which makes short-term bets on lower rates risky. Patience still looks like the key theme this year. For equity index derivatives, this creates a difficult mix: solid growth can support valuations, but high rates can cap gains. That favors strategies built for range-bound markets or downside protection, such as selling out-of-the-money call options against the SPX. Upside in major indices may stay limited until the data clearly cools. With the VIX near 14, markets look complacent despite ongoing policy pressure. Buying near-term VIX call options may be a relatively low-cost hedge against a sudden shock. A more hawkish Fed tone next month could quickly lift volatility from these depressed levels.SOFR Futures And Yield Outlook
Rates traders should keep watching Secured Overnight Financing Rate (SOFR) futures, since expected rate cuts later in the year may be pushed back further. Continued labor market strength gives bond yields little reason to fall much. Positions betting on a sharp drop in yields are going against the most important data signal right now. Create your live VT Markets account and start trading now.In February, the Philadelphia Fed manufacturing survey rose to 16.3, beating forecasts of 8.5
The Philadelphia Fed Manufacturing Survey for the United States came in at 16.3 in February. Economists expected 8.5.
That is 7.8 points above forecasts. It points to stronger factory conditions than expected.
