Canada’s housing starts seasonally adjusted year-over-year in November registered at 254,100. This number exceeded the predicted 248,000 for the same period.<\/p>\n
The stronger-than-expected housing starts number for November shows the domestic economy has more momentum than many anticipated. With 254,100 new units started, this suggests underlying demand remains firm despite the higher interest rates we’ve seen over the past few years. This resilience makes it harder for the Bank of Canada to justify a near-term interest rate cut.<\/p>\n
We have to view this data alongside the latest inflation report from October 2025, which showed CPI holding stubbornly at 2.8%, well above the Bank’s 2% target. Strong construction activity can fuel wage and material price pressures, adding to the Bank of Canada’s inflation worries. Consequently, derivatives markets should begin pricing out the probability of a rate cut in the first quarter of 2026.<\/p>\n
For those trading interest rate swaps and CORRA futures, the immediate play is to position for a “higher for longer” rate scenario. We saw a similar dynamic back in 2023, where strong economic reports consistently pushed back expectations for central bank pivots. This could involve selling futures contracts that bet on a March 2026 rate cut or buying options that profit if rates remain at current levels through the winter.<\/p>\n
This economic strength is bullish for the Canadian dollar, as a more hawkish Bank of Canada typically attracts foreign investment. Recent trading has seen the loonie struggle against the US dollar, hovering near 1.37, but this data provides a solid reason for a reversal. We should consider buying CAD call options or selling USD\/CAD call options to position for a move down toward the 1.35 level in the coming weeks.<\/p>\n
In equity derivatives, this news directly benefits sectors like homebuilders, material suppliers, and the major banks, making call options on related ETFs look more attractive. However, the prospect of sustained high interest rates could weigh on the broader TSX index, especially growth and technology sectors. This suggests a pair trade might be prudent, going long financials while hedging with put options on the broader market.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Canada’s November housing starts hit 254,100, surpassing the forecasted 248,000, indicating stronger construction activity.<\/p>\n","protected":false},"author":62,"featured_media":17024,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-36864","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/36864","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=36864"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/36864\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17024"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=36864"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=36864"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=36864"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}