Canada’s Core Consumer Price Index (CPI) increased from 2.6% to 2.8% year-on-year in September. This reflects a rise in consumer prices in Canada.

In foreign exchange markets, the US dollar’s strength led to a decline in gold prices and influenced currency pairs like EUR/JPY and GBP/USD. The Euro faces challenges around the 1.1600 mark, while GBP/USD remains below 1.3400 due to the strengthening dollar.

Commodity Market Trends

Commodity markets witnessed steady prices for WTI oil amidst persistent concerns of oversupply. Gold prices revisited fresh multi-day lows amid a stronger US dollar and profit-taking activity.

In the cryptocurrency market, major currencies such as Bitcoin, Ethereum, and Ripple experienced declines. This was driven by macroeconomic uncertainties and geopolitical tensions affecting global markets.

Despite recent concerns, there is relief that the global economy is performing better than expected, although underlying shifts remain poorly understood. Trends in corporate asset ownership indicate a significant plunge in Bitcoin treasury inflows over the past five years.

Such market dynamics and economic indicators continue to shape financial landscapes, with ongoing analysis required to navigate these complexities effectively.

Bank Of Canada Interest Rate Outlook

With Canada’s core inflation for September coming in hotter than expected at 2.8%, we believe the Bank of Canada is now firmly in a hawkish position. This print is uncomfortably close to the top of their 3% target range. All eyes will be on the Bank’s next interest rate decision on December 4th, 2025, as pressure builds for them to act.

Traders should anticipate a repricing in the short-term interest rate markets. We are seeing a higher probability of a rate hike being priced into Canadian Overnight Repo Rate Average (CORRA) futures. This suggests that positioning for higher short-term Canadian yields is the most direct response to this inflation data.

For the currency markets, this news complicates the outlook for the Canadian dollar. While higher potential interest rates are supportive for the CAD, the US dollar remains strong, with the Federal Reserve having held rates firm throughout 2025. This dynamic suggests that any strength in the Canadian dollar might be limited, creating opportunities for range-trading strategies in USD/CAD derivatives.

The rise in inflation comes at a tricky time, as other data points from 2025 have shown signs of a cooling economy. We saw Canada’s unemployment rate tick up to 5.9% in the third quarter, a noticeable increase from the sub-5.5% levels seen in late 2023. This puts the Bank of Canada in the difficult position of having to choose between fighting inflation and supporting a slowing job market.

Given the memory of the inflationary surge from 2022 to 2023, we expect central banks to have very little patience for persistent price pressures. This historical context suggests the Bank of Canada will likely prioritize taming inflation, even if it comes at the cost of some economic growth. Therefore, options traders should consider pricing in higher volatility for the Canadian dollar in the weeks leading up to the December meeting.

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