Today
Futures are moving lower as North American markets return from a holiday break, with many Asian markets closed for Lunar New Year. Treasuries edged higher, pushing the 10-year yield down to 4.03%, supported by last week’s softer inflation data and a broader risk-off tone. Gold retreated toward $4,900 an ounce, while silver fell sharply, and Bitcoin also declined. Investors are also monitoring rising Middle East tensions, upcoming ADP payroll data, comments from Fed officials, and minutes from the Fed’s January meeting, all of which could shape expectations for the interest-rate path. This comes as the S&P 500 comes off its second consecutive losing week as fears about AI’s disruption hit industries such as software, real estate, trucking, and financial services. Both the S&P 500 and Dow lost more than -1% last week while the Nasdaq lost more than -2%. The TSX, however, rose 1.86%, bringing its YTD performance to 4.3%, an impressive feat when compared to the S&P 500 which is flat for the year.
Headline inflation in Canada eased to 2.3% in January from 2.4% in December, coming in slightly below expectations as gasoline base effects helped cool annual price growth. Prices were flat month over month, versus forecasts for a modest increase, while the BoC’s preferred core measures also eased, with the median rate slipping to 2.5% and trim to 2.4%. Shelter inflation slowed to 1.7% year over year, its first reading below 2% in nearly five years, reflecting softer rent increases and lower mortgage interest costs. Consumers also saw relief in cellular services, which fell 0.8% on the month, and grocery inflation, which eased to 4.8% annually. The data is unlikely to shift the BoC from its current policy pause at 2.25%, as Governor Tiff Macklem has cautioned against cutting rates amid supply-side risks tied to U.S. tariffs.
Mark Carney has appointed Janice Charette as Canada’s new chief trade negotiator with the U.S., placing her at the center of the upcoming review of the USMCA trade agreement amid increasingly strained bilateral relations. Charette, a former clerk of the Privy Council and senior diplomatic figure, will work alongside Canada’s ambassador to the U.S., Mark Wiseman, and advise Carney and Trade Minister Dominic LeBlanc during the mandated sixth-year review of the pact, which took effect in July 2020. What was once expected to be a routine review has become more uncertain as Trump has privately considered withdrawing from the agreement and is pressing Canada and Mexico for additional concessions tied not only to trade but also to migration, drug trafficking, and defense.
EM currencies have been more stable than their G7 counterparts for nearly 200 consecutive days, the longest stretch since 2008 and potentially a record since 2000, as a weaker U.S. dollar, steady commodity prices and strong capital inflows reduce volatility. Indexes are showing EM currencies swinging less than developed peers, helped by expectations of gradual Fed easing and solid carry-trade activity, where investors borrow in low-yielding currencies to invest in higher-yielding EM assets. Inflows into emerging markets are running at the fastest pace for this period since 2019, helping push a Bloomberg index of developing-market currencies up about 2.8% this year after a 17.5% gain in 2025. Improvements, including stronger relative growth and growing foreign-exchange reserves, are also helping with stability, while developed-market currencies like the dollar and yen face turbulence tied to U.S. fiscal concerns, tariff threats, and Japanese policy uncertainty.
Unemployment in the UK rose to 5.2% in the final quarter of last year, its highest level since the pandemic and above expectations while private-sector wage growth slowed to 3.4%, the weakest in over five years, signaling easing labour-market pressures. Youth unemployment climbed to 14%, highlighting growing strain among younger workers, and payroll data showed a continued annual decline in employment. The softer figures boosted expectations for further BOE rate cuts, with markets now fully pricing in two reductions this year and a possible move as soon as March. While some policymakers remain cautious, the combination of rising joblessness, cooling wage growth, and slowing economic momentum strengthens the case for additional monetary easing within the next few months.
Housing still an issue. Canada’s housing construction continued to slow in January, with CMHC reporting a 15% drop in the seasonally adjusted annual pace of housing starts to 238,049 units from 280,668 in December. The agency’s six-month moving average also declined 3.5%, marking a fourth consecutive monthly drop and signaling a sustained downward trend. CMHC said trade and geopolitical uncertainty, high construction costs, weaker demand, rising inventories and lower immigration levels are weighing on developer activity, with little sign of a near-term rebound. While actual starts in areas with populations over 10,000 moved up 1% year over year to 16,088 units, the broader trend remains soft. The slowdown poses a challenge to Mark Carney’s pledge to double annual housing construction to 500,000 units over the next decade, which is well above the historical peak of about 260,000 in the mid-1970s, despite the federal government’s launch of the $13 billion Build Canada Homes initiative aimed at boosting supply.
Very patriotic. A Slovak fugitive who had been on the run for 16 years was finally arrested when he turned up in Milan to support his hockey team at the Winter Olympics. The 44-year-old man, who was not named, was wanted by Italian authorities for a series of thefts committed in 2010. Officials were able to track down and arrest the man last Wednesday after he checked into a campsite in the outskirts of Milan, thanks to an automatic alert from the campsite reception. Too bad he missed the opening game for team Slovakia who ended up defeating the defending gold medalist Finland 4-1 at Milan’s Santagiulia Arena.
Diversion: May need some snow tires next time
