Canada’s core monthly CPI was unchanged at 0.2% in January, the same as the previous month
Canada’s core Consumer Price Index (CPI) rose 0.2% month over month in January. This was unchanged from the previous 0.2% reading.
This shows core consumer prices are rising at the same monthly pace as before. Core CPI tracks price changes while excluding some of the most volatile items.
In January, Canada’s monthly CPI stayed flat at 0%, missing forecasts of a 0.1% rise
Canada’s Consumer Price Index (CPI) was 0% month on month in January. This was below the forecast of 0.1%.
This means consumer prices did not rise or fall in January. The result was 0.1 percentage points below expectations.
A flat January inflation print is a clear dovish signal for the Bank of Canada. The surprise slowdown in price pressure gives the central bank more room to cut interest rates sooner than expected. We are now pricing in a much higher chance of a rate cut at the April meeting.
This puts immediate downward pressure on the Canadian dollar. USD/CAD jumped to 1.3650 this morning as markets price in lower yields in Canada versus the United States. This pattern is familiar: the loonie fell for months in the second half of 2025 after inflation repeatedly came in below forecasts.
For equities, the news is supportive, especially for the S&P/TSX Composite Index. Lower borrowing costs and a more accommodative central bank are generally positive for earnings and valuations. We are looking at call options on the index, targeting a break above the 22,500 resistance level in the coming weeks.
In fixed income, the reaction was quick. Bond prices rallied as traders moved to price in rate cuts. The Canada 2-year government bond yield—a key signal for the Bank of Canada’s policy path—fell 10 basis points to 3.85% after the release. This supports long positions in Canadian government bond futures.
We should also watch rate-sensitive sectors that tend to benefit most when rates fall. Call options on real estate (REIT) and utility sector ETFs could offer strong upside. In 2025, these sectors often led when markets started to seriously price in monetary easing.
In January, Canada’s annual CPI came in at 2.3%, below economists’ 2.4% forecast
Canada’s Consumer Price Index (CPI) rose 2.3% year over year in January. This was below the 2.4% forecast.
This CPI print suggests inflation was a bit lower than expected. No other details were provided.
At 2.3%, inflation gives the Bank of Canada more room to think about cutting interest rates sooner. Markets have quickly adjusted. Overnight swaps now price in almost a 70% chance of a cut by the July meeting, up from about 45% last week. This shift should pressure the Canadian dollar.
That means we should consider trades that benefit if USD/CAD rises. In 2025, the Canadian dollar fell by more than three cents versus the U.S. dollar in the quarter after the Bank first signaled a pause in rate hikes. Buying USD/CAD call options, or call spreads, could be a good way to position for a similar move in the coming weeks.
In rates, this data makes Government of Canada bonds more appealing. With the benchmark rate at 4.25%, yields now have more room to fall than to rise. Traders can look at buying CORRA futures, which should gain value if the Bank cuts rates as the market expects.
Lower rates can also support Canadian equities, especially sectors that are sensitive to borrowing costs, such as REITs and utilities. The S&P/TSX 60 Index has struggled to move above recent highs, but the chance of lower rates could be the catalyst it needs. Call options on broad-market ETFs can provide exposure to this potential upside.
Still, we need to watch the strong labor market. The latest report showed wage growth holding at 4.5%. Stubborn wage pressure could make the Bank of Canada more cautious than this CPI reading alone suggests. Any hawkish comments from Bank officials could quickly reverse the initial market reaction.
Canada’s BoC core CPI rose 0.2% in January, reversing a 0.4% fall in the previous month
Canada’s Bank of Canada core consumer price index rose 0.2% month over month in January. This follows a -0.4% reading the month before.
This shift marks a move from a monthly decline to a monthly increase. The latest figure is 0.6 percentage points higher than the prior value.
Inflation Reversal And Rate Cut Odds
The latest inflation data shows a clear reversal. Core prices rose 0.2% in January after falling 0.4% in December 2025. This unexpected increase suggests that underlying inflation is not cooling as fast as expected. As a result, a near-term interest rate cut from the Bank of Canada now looks less likely. Other data supports this view. Canada’s economy added 45,000 jobs last month, far above forecasts for a 15,000 gain. With year-over-year core inflation still steady at 2.6%, the central bank has little pressure to ease policy. Strong growth also gives it room to wait and see whether inflation moves back to the 2% target. For derivatives traders, this means trades based on large, rapid rate cuts may need to be reduced or closed. The Overnight Index Swaps market is already adjusting, with only a 20% chance of a cut priced in for the April meeting. That is a big drop from the 60% probability priced in just a few weeks ago. This also differs from late 2025, when markets expected several rate cuts this year. The December drop now looks more like a one-off than the start of a new trend. Expectations may need to shift toward a “higher for longer” outlook from the Bank of Canada.Positioning For A Higher For Longer BoC
We are therefore looking at options strategies that could benefit from a steady or stronger Canadian dollar, especially versus currencies where central banks are still expected to cut rates. One approach is buying call options on the CAD/USD pair or selling out-of-the-money puts. Implied volatility in interest rate futures may also rise ahead of the next Bank of Canada meeting in March. Create your live VT Markets account and start trading now.Canada’s foreign portfolio investment fell to -$5.57B in December, far below the $14.27B forecast
Canada’s foreign portfolio investment in Canadian securities was **-$5.57bn** in December. This was below the expected **$14.27bn**.
This means foreign investors pulled money out of Canadian securities during the month. The difference versus the forecast was **$19.84bn**.
Shift In Foreign Investor Sentiment
Foreign sentiment toward Canadian assets has turned weaker. December 2025 showed a **$5.57bn** net outflow, even though markets expected a **$14.27bn** inflow. That is a sharp reversal and the biggest outflow in more than 18 months. It suggests foreign investors are becoming less confident. This is also a bearish sign for the Canadian dollar. With less foreign demand for CAD to buy Canadian securities, the currency may weaken further against the US dollar. USD/CAD has already climbed to **1.3850** in early February 2026 trading, and it could test **1.40** in the coming weeks. Traders may look at buying US dollar call options or shorting Canadian dollar futures. Implied volatility on CAD options has risen to **8.9%**, showing higher uncertainty. These trades can help investors profit from, or hedge against, a weaker loonie. Outflows can also add selling pressure to Canadian stocks. The **S&P/TSX Composite Index** benefited from foreign buying through much of 2025, but it now looks more exposed to a pullback. The index is already down **2.5%** since the start of February, with financial and resource stocks dropping the most. Put options on TSX-tracking ETFs offer a direct way to position for a potential decline. Watch for institutional selling in major Canadian banks and energy producers, which often reflects foreign demand. A move below **21,000** on the TSX would support a more bearish trend.Historical Parallels And Oil Link
This move is similar to 2014–2015, when falling oil prices led to sustained capital outflows from Canada. That period brought a long stretch of weakness in both the Canadian dollar and Canadian stocks. Today, WTI crude prices sitting just below **$70** a barrel are adding to these concerns. Create your live VT Markets account and start trading now.Canada’s wholesale sales rose 2.0% month on month in December, missing the 2.1% forecast.
Canada’s wholesale sales rose 2% month over month in December. This was slightly below the 2.1% increase that markets expected.
That is a 0.1 percentage point miss versus forecasts. No other details were included in the release information shared.
While the miss is small, it adds to signs that economic growth is cooling. Recent data points in the same direction: January inflation fell to 2.8%, below the Bank of Canada’s target range, and last month’s jobs report showed weaker-than-expected hiring. Together, these suggest last year’s momentum is fading faster than expected.
With this run of softer data, it becomes harder for the Bank of Canada to justify another rate hike at its March meeting. We now expect the Bank to hold rates steady and to shift its messaging toward a more neutral, or even dovish, tone. In a similar slowdown in late 2023, the Bank kept rates on hold for several months before later signaling cuts.
Based on this view, we are positioning for a weaker Canadian dollar in the coming weeks. USD/CAD has already moved from 1.34 to 1.36 since the start of the year, and we see room for more upside. We are considering buying USD/CAD call options expiring in April to benefit if the CAD continues to weaken.
In rates markets, traders are now pricing in a higher chance of cuts later this year. We are looking at Canadian Overnight Repo Rate Average (CORRA) futures as a way to position for a lower policy rate by the third quarter. This directly reflects the risk that the central bank will need to respond to a slowing economy.
On the equity side, slower growth can weigh on earnings, especially in consumer-focused sectors. We see value in buying put options on the S&P/TSX 60 index as a hedge against a potential pullback. Implied volatility is still fairly low, which makes protective puts a relatively cheap hedge for the weeks ahead.
In January, Canada’s BoC core CPI slipped to 2.6% year over year, down from 2.8% previously
Canada’s Bank of Canada core Consumer Price Index (CPI) rose 2.6% year over year in January. That is down from 2.8% in the prior reading.
The 0.2 percentage point decline shows core prices are rising more slowly than before. Core inflation excludes some volatile items.
Core Inflation Signals Earlier Rate Cuts
This morning’s drop in core inflation to 2.6% is an important signal. It suggests the Bank of Canada’s restrictive policy through 2025 is working, and may be working faster than many expected. This result brings forward the likely timing of an interest rate cut. With this data, we should expect a more dovish tone from the Bank of Canada at its next meeting. CORRA futures now price in more than a 70% chance of a 25 basis point cut by the April meeting, up from about 40% last week. We should consider positioning in derivatives that benefit from lower short-term rates, such as buying call options on three-month CORRA futures. The Canadian dollar will likely weaken as expectations for rate cuts build. That would widen the policy gap with the U.S. Federal Reserve, where inflation is proving somewhat more persistent. We should consider buying USD/CAD call options with expirations over the next two to three months to benefit from this move. This view is also supported by soft Q4 2025 GDP data, which showed the Canadian economy stalling. We saw a similar pattern in the second half of 2025. Employment started to soften after a long stretch of strength. That was the first clear sign that led the BoC to pause its hiking cycle. This drop in core CPI looks like the second—and more important—signal that a policy pivot may be close.Volatility May Fade As Market Reprices
The initial market response may push implied volatility higher. But the path for the BoC now looks clearer. In the coming weeks, volatility could fall as the market settles on the idea of a spring rate cut. That may create an opportunity to sell volatility in longer-dated Canadian interest rate options, based on the view that the new dovish direction is now more firmly in place. Create your live VT Markets account and start trading now.In January, Canada’s BoC core CPI slowed to 2.6% year over year, down from 2.8% previously
Canada’s core Consumer Price Index (CPI) rose 2.6% year over year in January. That was down from 2.8% in the prior reading.
This 0.2 percentage point decline shows core prices are rising more slowly than before. Core inflation excludes some volatile items.
Implications For Bank Of Canada Policy
This morning’s drop in core inflation to 2.6% is an important signal. It suggests the Bank of Canada’s restrictive policy through 2025 is working, and possibly faster than many expected. It also brings forward the timing for a potential interest rate cut. Based on this data, we should expect a more dovish tone from the Bank of Canada at its next meeting. CORRA futures are now pricing in more than a 70% chance of a 25 basis point cut by the April meeting, up from about 40% last week. We should consider positioning in derivatives that benefit from lower short-term rates, such as buying call options on three-month CORRA futures. The Canadian dollar may weaken as rate-cut expectations strengthen. This would widen the policy gap with the U.S. Federal Reserve, where inflation remains somewhat more persistent. We should consider buying USD/CAD call options with expirations over the next two to three months to capture this move. This view is also supported by soft Q4 2025 GDP data showing the Canadian economy has stalled. We saw a similar pattern in the second half of 2025. Employment started to cool after a long period of strength. That was the first major sign of stress and helped push the BoC to pause its hiking cycle. This sharper drop in core CPI looks like the second, and more meaningful, sign that a policy pivot could be close.Volatility And Positioning Opportunities
The initial market reaction may trigger a jump in implied volatility. Still, the policy path for the BoC now looks clearer. Over the next few weeks, volatility could fall as markets converge around a spring rate cut. That may create an opportunity to sell volatility in longer-dated Canadian interest rate options, based on the view that the new dovish direction is now established. Create your live VT Markets account and start trading now.February’s Empire State manufacturing index in New York topped forecasts, rising to 7.1 versus 6 expected
The New York Empire State Manufacturing Index in the United States came in above forecasts in February. The forecast was 6, while the actual reading was 7.1.
Manufacturing data for the New York region was stronger than expected, with a reading of 7.1 versus a forecast of 6. This points to firmer economic activity than the market had been expecting. This upside surprise puts the Federal Reserve’s “patient” stance on interest rates under more pressure.
Implications For Fed Policy
This report is not happening in isolation. January CPI showed inflation still stuck at 3.4%, and the latest jobs report added a solid 225,000 payrolls. Together with today’s manufacturing strength, the data suggests the economy may not need rate cuts soon. Markets may start to price a lower chance of cuts in the first half of the year. With that in mind, we should consider trades that benefit if rates stay higher for longer. This could include using options to position for lower Treasury prices, or selling interest-rate futures tied to SOFR. The period of easy monetary policy may be fading. For equities, the signal is mixed, so positioning should be tactical. We can buy call options on cyclical sectors like industrials (XLI), which tend to benefit from stronger manufacturing. At the same time, it may be wise to protect the broader portfolio by buying put options on the Nasdaq 100, which is usually more sensitive to higher interest rates. This strength can also support a stronger U.S. dollar. A more hawkish Fed outlook often attracts foreign capital, which can lift the currency. We should consider long USD exposure, such as call options on the U.S. Dollar Index (UUP).Historical Context And Positioning
It is worth recalling the market shifts we saw in 2025. Looking further back to the 2022 cycle, a run of strong economic reports quickly pushed the Fed from patient to aggressive. Today’s setup is starting to feel similar, so we should be ready for that kind of shift. Create your live VT Markets account and start trading now.Weak UK jobs data pressures sterling, ends GBP/JPY gains and turns near-term bias bearish below 210.00
GBP/JPY dropped after weak UK jobs data raised expectations for Bank of England rate cuts this year. The pair traded near 207.28, down about 0.93% on the day and close to a two-month low.
Markets are now fully pricing in two BoE cuts this year, with the first possibly as soon as March. The Japanese yen stayed firm, supported by optimism about Prime Minister Sanae Takaichi’s pro-stimulus plans and expectations of a Bank of Japan rate rise in the coming months.
