Canada\u2019s gross domestic product (QoQ) fell to -0.2% in the fourth quarter. This was down from 0.6% in the previous quarter.<\/p>\n
The change shows output declined over the period. It marks a move from growth to contraction in quarterly terms.<\/p>\n
This negative Q4 GDP reading is the signal we have been waiting for, confirming that the Bank of Canada’s aggressive rate hikes through 2024 and 2025 are finally biting. We should now anticipate a much more dovish tone from the central bank, with rate cuts becoming a real possibility by the second quarter. The market will quickly begin pricing in this shift.<\/p>\n
For our purposes, this strengthens the case for shorting the Canadian dollar against the greenback. The prospect of diverging monetary policy with the US Fed makes long USD\/CAD positions attractive, especially using futures contracts. We saw the pair consolidate around the 1.35 level for much of late 2025, and this news could be the catalyst to test higher resistance.<\/p>\n
On the equity front, a slowing economy is a headwind for the S&P\/TSX 60, particularly for the major banks. We should consider buying put options on broad Canadian market ETFs like the EWC to position for a potential downturn. This negative growth number makes a strong case that corporate earnings will disappoint in the coming quarters.<\/p>\n
This weak GDP report arrives just as we saw January’s inflation data cool to 2.9%, giving the Bank of Canada the cover it needs to pivot from fighting inflation to stimulating growth. This is a significant change from the economic environment of 2025, where high inflation was the primary concern. We must adjust our strategies accordingly to anticipate lower rates and a weaker loonie.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Canada\u2019s GDP fell 0.2% in Q4, reversing a 0.6% gain in the prior quarter.<\/p>\n","protected":false},"author":103,"featured_media":17022,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-50405","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