Macklem Flags Energy Risk as TSX Rallies Hard

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Macklem Flags Energy Risk as TSX Rallies Hard

S&P/TSX36,137.10+1.55%

USD/CAD1.41-0.46%

EUR/CAD1.59+0.12%

WTI Crude96.08-1.93%

Market Snapshot

Asset	Level	Change
S&P/TSX	36,137.10	+1.55%
USD/CAD	1.41	-0.46%
EUR/CAD	1.59	+0.12%
WTI Crude	96.08	-1.93%
Natural Gas	3.17	-2.16%
Gold	4,199.70	+0.71%
Brent Crude	106.33	+0.39%
Bitcoin	82,587.92	+0.54%
Canada 2Y Govt Yield	3.21%	+2 bp
Canada 10Y Govt Yield	3.85%	-2 bp

Prior Economic Events

Data	Prior	Cons	Actual
BoC Gov Macklem Speech	-	-	-
BoC Rogers Speech	-	-	-
BoC Gov Macklem Speech	-	-	-

Today's Economic Events

Data	Prior	Cons	Time
Housing Starts Level	229,000	232,500	08:15

TSX surged 1.55% to 36,137 as healthcare and technology led a broad advance
Macklem says BoC has "not raised rates yet" as energy prices complicate the outlook
2-year yield rose 2 bp to 3.21% while the 10-year eased 2 bp to 3.85%; loonie firmed on broad USD weakness

Yesterday's Recap

Canadian markets delivered a strong session on Thursday, with the S&P/TSX Composite climbing more than 550 points, or 1.55%, to 36,137.10, driven by healthcare and technology shares. The advance came despite a softer commodity tape, as WTI crude fell 1.93% to $96.08 and natural gas dropped 2.16% to $3.17, while Brent bucked the trend, adding 0.39% to $106.33. Gold extended its run, gaining 0.71% to $4,199.70, and Bitcoin edged up 0.54% to $82,588.

In fixed income, the curve flattened modestly: the 2-year Government of Canada yield rose 2 bp to 3.21% while the 10-year eased 2 bp to 3.85%, a bear-flattening signal that front-end pricing is anchoring to the BoC's 2.25% policy rate even as long-end yields soften. In currency markets, USD/CAD slipped 0.46% to 1.41 as the loonie rode broad US dollar weakness, while EUR/CAD firmed 0.12% to 1.59. On the speaker circuit, Governor Tiff Macklem, speaking from Bangkok, said Canada has "not raised rates yet" and flagged energy prices as a key challenge for the rate outlook, while Senior Deputy Governor Carolyn Rogers also addressed audiences.

The comments landed amid fresh US tariff measures taking effect on Canadian goods, adding a trade-policy drag to an already complicated inflation picture.

The Day Ahead

Today's calendar is light, with a single release: September housing starts at 08:15 ET, where the consensus looks for 232,500 annualized units versus the prior 229,000. A print above consensus would reinforce the view that residential construction is stabilizing after a bruising rate cycle, though the CREA data showing benchmark home prices down 3.5% year-over-year in September suggests the resale market remains the softer leg of housing. Markets will also parse any follow-up from Macklem's Thursday remarks, with the Governor scheduled to speak again at 00:15 ET today.

With no further data due tomorrow, attention shifts quickly to next week's inflation and labour market prints, which the BoC has flagged as critical inputs for its next decision. Dealers describe the upcoming decision as "live," with the pair of incoming data drops likely to determine whether the Bank leans toward resuming hikes or holding at 2.25%.

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Other Economic Notes

Canada's housing market continues to bifurcate: construction activity is holding up near 230,000 units annualized even as resale prices deflate, with the national benchmark down 3.5% from a year earlier as higher mortgage rates bite. The federal government's datacentre buildout is facing localized resistance, with more than 100 projects now tracked nationally, a friction point for the AI infrastructure investment thesis. Meanwhile, the AI adoption imperative is now a policy theme, with Macklem himself urging Canadian businesses to move faster on AI while acknowledging the productivity and displacement risks.

Trade friction remains a live drag, as new US tariffs on Canadian goods took effect this week, compounding the cost-push pressure already emanating from elevated energy prices.

Global Macro News

Global central bank dynamics are shifting in ways that matter for CAD. The Bank of England is widely tipped to raise rates in November, a hawkish signal from a G7 peer that contrasts with the ECB's emerging pause debate despite political uncertainty in France. The euro's strength against the loonie — EUR/CAD at 1.59 — reflects both ECB resilience and France's fiscal noise.

In Asia, Bank Indonesia is watching oil prices and the Fed closely ahead of its next meeting, underscoring how energy is re-entering the global inflation conversation. The US tariff regime expanding against Canada is part of a broader protectionist turn that is fragmenting supply chains and complicating central bank forecasts on both sides of the border. ↓ p.3

Continuation

Global Macro News (continued)

For Canada, the double squeeze from US tariffs and elevated energy prices — WTI at $96, Brent above $106 — is the defining macro tension: energy revenue supports the terms of trade, but the pass-through to consumer prices constrains the BoC's ability to ease. Bitcoin's stability near $82,600 and gold's grind toward $4,200 suggest continued appetite for hard assets as policy paths diverge.

BoC Watch

Macklem's Bangkok remarks were the week's key signal: the Bank "has not raised rates yet," but energy prices pose real challenges to the outlook — a formulation that keeps a hike squarely on the table without committing to one. With the policy rate at 2.25% and CPI running at 3.0% year-over-year, the Bank sits in an awkward spot: inflation is above target, but tariff-driven cost pressure and energy volatility muddy the underlying trend. Governing Council's framing of the next decision as "live" — dependent on incoming data — suggests a genuine barbell between a hold and a resumption of tightening, with the pair of imminent data releases (CPI and labour) acting as the gatekeepers.

The flattening yield curve, with the 2s10s spread near 64 bp, implies markets see the hiking cycle as largely complete but not necessarily finished. Rogers's separate remarks on financial system resilience, alongside Macklem's AI productivity push, signal the Bank's attention is pivoting toward structural supply-side questions even as the cyclical mandate dominates. For rates traders, the asymmetry skews toward higher yields on strong data; for CAD, a hawkish hold would likely extend the currency's firming trend.

Watch Macklem's 00:15 ET remarks for any elaboration on the energy pass-through calculus.

Canada Macro Daily(Beta Mode)