The Bank of Canada’s latest Business Outlook Survey shows that sentiment among business operators remains subdued, although fears of a recession have decreased. Conducted in the last quarter of 2025, the survey indicates that while business sentiment is restrained, it remains higher than the low recorded earlier in the year.<\/p>\n
Many firms reported weak sales growth over the past year, largely due to trade tensions, but expect slight improvement soon. Export sales growth is predicted to be modest, with some businesses increasing sales to non-U.S. markets due to tensions with the United States.<\/p>\n
Most businesses have not experienced considerable capacity constraints or labour shortages. With demand expected to remain low, many plan to maintain or reduce staffing levels. Investment intentions have slightly improved, with a focus on routine maintenance amid trade uncertainty, while the oil sector anticipates a decline in investment in 2026 due to low oil prices.<\/p>\n
Tariff-related cost pressures have lessened compared to the previous quarter, though they persist. Few firms expect substantial increases in prices. Inflation expectations remain stable, with figures between 2.5% and 3%.<\/p>\n
The latest business outlook survey from the last quarter of 2025 suggests the Bank of Canada will remain on the sidelines. With their next interest rate decision just days away on January 22nd, this lukewarm economic data gives them little reason to act. We see this reflected in the latest inflation numbers, with December’s CPI coming in at 2.8%, squarely within the stable range businesses are expecting.<\/p>\n
This outlook implies that short-term interest rates are likely to stay capped for the near future. We believe derivative strategies that profit from a stable or slightly falling interest rate environment, such as selling out-of-the-money call options on CORRA futures, could be advantageous. This capitalizes on the view that a rate hike is off the table for the coming weeks.<\/p>\n
The subdued economic forecast, particularly the expectation of declining oil investment, points toward continued weakness for the Canadian dollar. With Western Canadian Select oil prices struggling to gain traction, hovering around $60, a key pillar of support for the currency is absent. This reinforces the trend we saw in late 2025 where the USD\/CAD pair steadily climbed from 1.35 to 1.38, suggesting that buying calls on USD\/CAD remains a relevant strategy.<\/p>\n
For equity markets, the message is mixed as easing recession fears are balanced by reports of weak sales growth and soft demand. The recent uptick in the national unemployment rate to 6.2% confirms what businesses were indicating last quarter about their hiring and investment plans. This environment suggests that the S&P\/TSX 60 may trade within a range, making strategies like covered calls or iron condors on index options attractive to collect premium from low volatility.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Business sentiment remains subdued, but recession fears ease; modest growth, stable inflation, and restrained investment expected.<\/p>\n","protected":false},"author":62,"featured_media":17021,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-39554","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\n\t\t