Canada’s wholesale sales rose by 2% month on month in December. This was below the expected increase of 2.1%.
The data shows a 0.1 percentage point shortfall versus forecasts. No further figures were provided in the release details shared.
The slight miss in December 2025’s wholesale figures, while minor on its own, adds to a pattern of cooling economic activity we’ve seen. Recent data reinforces this, with January’s inflation rate dipping to 2.8%, below the Bank of Canada’s target range, and last month’s job report showing weaker-than-expected hiring. These indicators suggest the momentum from last year is fading faster than anticipated.
This collection of softer data points makes it much harder for the Bank of Canada to justify another rate hike in their upcoming March meeting. We believe the central bank will now hold rates steady, shifting to a more neutral or even dovish stance in its communications. Looking back at the similar slowdown we observed in late 2023, the Bank held rates for several months before signaling cuts.
Given this outlook, we are positioning for a weaker Canadian dollar in the coming weeks. The USD/CAD exchange rate has already moved from 1.34 to 1.36 since the start of the year, and we see further upside. We are considering buying call options on USD/CAD with April expirations to profit from continued CAD weakness.
In the interest rate market, the probability of rate cuts later this year is now being priced in more aggressively. We are looking at Canadian Overnight Repo Rate Average (CORRA) futures to bet on a lower policy rate by the third quarter. This is a direct play on the central bank being forced to react to the slowing economic picture.
On the equity side, this economic slowdown could pressure corporate earnings, particularly in consumer-sensitive sectors. We see value in purchasing put options on the S&P/TSX 60 index as a hedge against a potential market dip. Implied volatility has remained relatively low, making protective puts an inexpensive strategy for the weeks ahead.
