BoC Holds, Flags Oil Risks

Market Snapshot

Asset	Level	Change
S&P/TSX	32,312.67	-1.87%
USD/CAD	1.37	+0.34%
EUR/CAD	1.58	+0.38%
WTI Crude	95.99	-0.34%
Natural Gas	3.17	+3.52%
Gold	4,697.50	-3.93%
Brent Crude	107.73	+0.33%
Bitcoin	70,130.59	-1.56%
Canada 2Y Govt Yield	2.25%	+0.00%
Canada 10Y Govt Yield	3.29%	-3.35%

Prior Economic Events

Data	Prior	Cons	Actual
Housing Starts Level	250,900	252,500	238,500
Inflation Rate Year-over-Year	2.30	1.90	1.80
Core Inflation Rate Year-over-Year	2.60	-	2.30
Inflation Rate Month-over-Month	0	0.70	0.50
BoC Interest Rate Decision	2.25	2.25	2.25
BoC Press Conference	-	-	-

Today's Economic Events

Data	Prior	Cons	Time

Friday (2026-03-20)
New Housing Price Index Month-over-Month	-0.40	-0.30	04:30
Retail Sales Excluding Autos Month-over-Month	0.10	1.20	04:30
Retail Sales Month-over-Month Final	-0.40	1.50	04:30
Retail Sales Month-over-Month Prel	1.50	-	04:30

Bank of Canada maintains policy rate at 2.25%, citing Middle East tensions and potential oil-driven inflation pressures.
February inflation data undershot expectations, with YoY rate at 1.8% versus 1.9% consensus, easing some rate cut bets.
Housing starts disappointed at 238,500, signaling ongoing weakness in residential construction amid high borrowing costs.

Yesterday's Recap

Canadian markets reacted to the Bank of Canada's rate decision and softer inflation data, with the S&P/TSX Composite closing down 1.87% at 32,312.67, driven by declines in energy and materials sectors. USD/CAD rose 0.34% to 1.37, reflecting a stronger U.S. dollar and commodity price volatility, while EUR/CAD gained 0.38% to 1.58.

February's inflation release showed YoY CPI at 1.8% against a 1.9% consensus, with core inflation at 2.3% and MoM at 0.5% versus 0.7% expected, pressuring bond yields lower as the 10-year Government of Canada yield fell 3.35% to 3.29%. Housing starts came in at 238,500, below the 252,500 forecast, highlighting persistent softness in the housing market. The BoC held its policy rate at 2.25% as anticipated, with the subsequent press conference emphasizing risks from Middle East conflicts on oil prices.

WTI crude dipped 0.34% to 95.99, while natural gas surged 3.52% to 3.17 amid supply concerns. Gold tumbled 3.93% to 4,697.50, mirroring broader safe-haven unwinds. Brent crude edged up 0.33% to 107.73, and Bitcoin fell 1.56% to 70,130.59.

The 2-year Canada government yield held steady at 2.25%.

The Day Ahead

Tomorrow brings key releases on March 20, including the New Housing Price Index MoM, expected at -0.3% following -0.4% prior, which could underscore cooling in real estate amid elevated rates. Retail sales data will be in focus, with MoM final consensus at 1.5% after -0.4% previous, potentially signaling consumer spending resilience. Excluding autos, retail sales are forecasted at 1.2% MoM versus 0.1% prior, offering insights into core consumption trends.

Preliminary retail sales MoM lacks a consensus but follows 1.5% prior, adding to volatility expectations. No major events today on March 19, allowing markets to digest yesterday's BoC hold and global oil dynamics. Traders will watch for any spillover from U.S.

Fed decisions impacting CAD crosses.

Other Economic Notes

Broader Canadian economic themes point to a slowdown in housing activity, exacerbated by high interest rates and affordability challenges, as evidenced by weak starts and price indices. (cont...)

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Other Economic Notes (continued)

Inflation trends remain below the BoC's 2% target midpoint, with recent undershoots suggesting room for policy easing later in 2026 if growth falters. Energy sector dynamics, including volatile oil and natural gas prices, continue to influence export revenues and provincial budgets, particularly in Alberta and Saskatchewan. The latest verified CPI YoY stands at 2.32% as of March 2025, providing context for ongoing disinflation progress.

Global Macro News

Global oil prices are under pressure from Middle East conflicts, with attacks on Iranian and Qatari facilities driving WTI and Brent volatility, directly affecting Canada's energy exports and inflation outlook. The yen neared 160 per dollar amid surging oil costs, while Asian currencies like the Philippine peso breached 60 per dollar, highlighting emerging market vulnerabilities that could spill over to CAD through trade channels. U.S.

Fed policy expectations are weighing on global yields, with Canadian 10-year bonds tracking lower, as resilient U.S. data tempers rate cut bets. European Central Bank dovishness supports EUR/CAD gains, but broader commodity weakness, including gold's decline, signals risk-off sentiment impacting TSX miners.

Bitcoin's 1.56% drop to 70,130.59 reflects crypto's sensitivity to macro risks, indirectly influencing Canadian fintech sentiment. Thai ride-hailing services are adjusting to rising oil prices, underscoring global inflationary pressures that the BoC flagged in its communications. Malaysian ringgit strength amid softer oil contrasts with CAD's softening, driven by differing energy import dependencies.

BoC Watch

The Bank of Canada held its policy rate steady at 2.25% in the March decision, aligning with consensus and emphasizing a data-dependent approach amid acute uncertainty from Middle East wars. In the press conference, Governor Tiff Macklem highlighted potential inflation risks from oil shocks but stated the bank would "look through" near-term impacts, focusing on underlying trends. Forward guidance remains neutral, with no explicit signals on rate cuts, though markets price in possible easing if inflation stays subdued below the 2% target.

Quantitative tightening continues without changes, supporting balance sheet normalization, which has contributed to stable short-term yields like the 2-year at 2.25%. Recent communications stress progress on disinflation, with February CPI at 1.8% YoY reinforcing the bank's view that core pressures are easing, potentially paving the way for cuts later in 2026. This stance implies limited near-term support for CAD, as traders interpret the hold as cautious amid global volatility.

Overall, the Governing Council's decision bolsters bond market rallies, with 10-year yields declining on reduced hike fears.

Canada Macro Daily(Beta Mode)