Canada\u2019s GDP rose 0.5% in April, exceeding Statistics Canada\u2019s 0.4% advance estimate and delivering the strongest monthly increase since July 2025. The gain was led by goods-producing industries, with mining, quarrying and oil and gas extraction driving much of the advance, while services grew more moderately. The April outcome indicates a firmer opening to the second quarter after activity stagnated over the winter and followed a weak first quarter.<\/p>\n
The data imply some upside risk to RBC\u2019s forecast for a 1.7% annualised quarter-on-quarter rise in second-quarter GDP. However, uncertainty around US trade policy and headwinds in the goods sector continue to cloud the near-term outlook. Overall, the latest figures align with an economy that is improving at a modest pace, rather than pointing to a broader shift in momentum.<\/p>\n
Based on the stronger-than-expected 0.5% GDP growth for April, we believe the Bank of Canada will be less inclined to cut interest rates in the near term. The latest Statistics Canada report from mid-June showed core inflation holding firm at 2.9%, supporting a patient, data-dependent stance from the central bank. We are therefore adjusting our interest rate swap positions to reflect a lower probability of a rate cut before the fourth quarter.<\/p>\n
We are positioning for a stronger Canadian dollar against the US dollar over the next several weeks. This economic outperformance, driven by the resource sector, provides a fundamental tailwind for the loonie, especially as recent U.S. jobless claims have ticked up slightly. Consequently, we are looking at buying CAD\/USD call options with expirations in late July and August.<\/p>\n
The data clearly points to strength in the goods-producing sector, particularly in oil, gas, and mining. With WTI crude prices having stabilized around $82 per barrel, this suggests the gains are driven by strong production volumes, which we expect to continue. We are adding to our long positions on derivatives tied to major Canadian energy and material producers.<\/p>\n
Despite the positive April report, we recognize that the overall economic outlook remains modest. The persistent uncertainty surrounding trade means this is not a signal for a major economic breakout. We will therefore hedge our bullish sector-specific positions by maintaining protective put options on the broader S&P\/TSX 60 index.<\/p>\n\n\n\n