Canada’s retail sales increased by 1.3% in November, surpassing expectations of a 1.2% rise. This growth reflects a positive trend in the retail sector for that month.
Analysts had forecast a smaller increase, but the actual figures showed stronger consumer spending. This development could influence economic assessments and future predictions.
Retail Sales Indicate Economic Resilience
The retail sales data from last November, which showed a 1.3% increase, confirmed the consumer was stronger than we thought heading into the end of 2025. This signal of economic resilience, while old, sets a specific tone for interpreting new data. It suggests an underlying momentum that may still be present in the economy.
This view is supported by the more recent jobs report for December 2025, which showed the Canadian economy added a surprisingly robust 45,000 jobs, keeping the unemployment rate steady at 5.8%. More importantly, wage growth in that report remained firm at over 4.5% year-over-year. This combination of spending and a tight labour market points to persistent inflationary pressures.
Given this, the Bank of Canada will be less inclined to signal any rate cuts at its meeting next week. We should anticipate a hawkish hold, meaning interest rates will likely stay elevated for longer than the market was pricing in a month ago. Consequently, we are adjusting positions in CORRA futures to reflect a lower probability of a rate cut before the summer.
Impact on Currency and Markets
This expectation should provide support for the Canadian dollar. A Bank of Canada holding firm while other central banks contemplate easing creates a favourable interest rate differential. We see value in options that will profit from the USD/CAD exchange rate moving lower, towards the 1.3300 level, in the coming month.
For equity markets, this scenario creates a mixed picture. While strong consumer activity is good for retail and financial stocks, the prospect of higher-for-longer interest rates could put pressure on the broader S&P/TSX 60 index. We are considering strategies that hedge against broad market downside while maintaining exposure to consumer-focused sectors.
