Launch Pad

Steady as it goes. The BoC held its policy rate steady at 2.25% for a second straight meeting, saying heightened uncertainty tied to evolving U.S. trade policy and tariff threats has made it difficult to predict whether the next move will be a hike or a cut. Governor Tiff Macklem warned that the era of open, rules-based trade with the U.S. is effectively over and that Canada must adapt to a the more unpredictable environment, adding that this shift is negative for both countries. While the bank still expects moderate growth of about 1.1% this year and 1.5% in 2027 and sees inflation hovering near its 2% target, officials stressed that those forecasts could quickly change. With consumption soft, investment cautious, and the labour market showing lingering slack, policymakers appear comfortable keeping rates near neutral and waiting for clearer signals on how trade tensions and global volatility play out. 

Not caving under the pressure. As expected, the Fed left interest rates unchanged at 3.5% to 3.75% yesterday, signaling patience as officials pointed to a solid economy and signs the labour market is stabilizing, with the FOMC voting 10–2 to hold and two governors dissenting in favour of a small cut. With no surprise in the decision to keep rates where they are, investors quickly turned their attention to the comments by Fed officials. Policymakers upgraded their view of growth, dropped language about rising downside employment risks, and described inflation progress as modestly positive, suggesting less urgency for near-term easing even as hiring remains soft and price pressures are still above target. Powell said the outlook has improved but warned that cooling trends continue, emphasizing a meeting-by-meeting, data-dependent approach rather than pre-committing to cuts. The decision comes amid political pressure from the Trump administration and scrutiny over Fed independence, although officials appear comfortable keeping rates unchanged. 

The USD weakened this week, prompting some strategists to question whether the Trump administration is intentionally allowing (or even encouraging) a softer currency to support trade competitiveness. Trump’s relaxed stance toward the dollar’s recent slide is fueling speculation that the U.S. currency may be entering a longer-term downtrend. While treasury yields, inflation expectations, and capital inflows remain relatively stable, the dollar entered 2026 overvalued and has since slid amid policy uncertainty, concerns about Fed independence, tense domestic politics, and speculation about coordinated U.S.-Japan currency intervention following reported rate checks. The softer greenback has lifted peers including the loonie, though analysts expect the loonie’s gains to be capped by flat oil prices and Canada’s fragile growth outlook, with its performance largely tied to broader dollar trends and ongoing trade risks around CUSMA. 

Brrrrr. A recent cold snap across parts of Canada and the U.S. is colliding with some of the highest U.S. energy costs in years, turning heating bills into a financial stress test for households already strained by food and housing prices. Electricity and piped gas costs are up 7.7% year-over-year and average home heating expenses in the U.S. are projected to rise 9.2% to about $995 this winter. And it wouldn’t be a 2026 story without a reference to AI. In some regions, next-day power prices are hitting record highs as rising demand from AI data centers tightens supply, pushing wholesale and retail bills higher and forcing families to ration heat, rely on space heaters, and fall behind on payments. The spike is adding pressure to consumer budgets at a time when savings rates are low and spending has outpaced income growth, raising concerns that higher utility costs could curb broader consumption, especially in hard-hit areas like the Northeast and parts of the South where heating reliance and infrastructure constraints make price swings even more painful. 

Homeward bound. A vacation in Spain turned into an ordeal for French couple when their cat escaped during a fuel stop. Despite weeks of searching and contacting authorities, the couple believed their cat was gone for good. That is until five months later when the cat was found just 500 meters from their home in France. It may seem too good to be true, but the couple was able to confirm it was their cat from its microchip. All in all, their feline friend somehow traveled roughly 250 km back across mountains, rivers and an international border. Scientists credit the return to cats’ spatial memory and ability to navigate using magnetic fields and scent cues. It’s safe to say, they’ll likely keep the cat home during their next trip. 


Diversion: What could go wrong? 

Oil prices are higher with Brent hitting $70 for the first time since September after Trump warned Iran to make a nuclear deal or face military strikes. Yesterday, in a social media post, Trump said that U.S. ships he ordered to the region were ready to fulfill their mission. Crude benchmarks have rallied so far this year, despite expectations for a market pressured by significant oversupply. Instead, geopolitical tensions from Iran to Venezuela and major supply disruption in Kazakhstan have helped to boost prices. Trump’s latest threats have injected a risk premium into prices. Bullish call options have been more expensive than bearish puts for the longest stretch in about 14 months as traders seek to protect against the risk of a new confrontation between the US and Iran. Bullish option  additions have also grown at the fastest pace in at least six years.