Market Update: CAD, Inflation, Oil & What It Means for You
Happy Monday!,
I wanted to share a quick update on a few things happening in markets right now, and what they could mean for you. Especially since we saw a meaningful rise in CPI (Canadian inflation data) today.
Why hasn’t the Canadian dollar risen with oil?
Normally, you’d expect the Canadian dollar to move higher when oil prices rise. That relationship hasn’t held this time, and the key reason comes down to why oil is increasing.
The Canadian dollar tends to respond much more to demand-driven oil price increases than supply-driven ones.
When oil rises because of strong global demand, Canada benefits through higher exports, stronger income, and increased investment—supporting our dollar.
When oil rises due to supply disruptions (geopolitics, production constraints, etc.), those gains are less meaningful and often temporary.
Right now, the move in oil is largely supply-driven, combined with elevated global uncertainty and continued demand for the U.S. dollar as a safe haven. That’s why the loonie hasn’t followed oil higher in the usual way.
Inflation: ticking higher and likely to stick around
The latest CPI reading today came in higher than previous months (which is a surprise to nobody), reinforcing that inflation is proving a bit more persistent.
A big part of this is energy. Again, I doubt this will surprise any of you. With oil prices elevated, gas and fuel costs are likely to remain higher through the rest of the year, which tends to filter through into broader inflation. This is one of the key reasons we may continue to see inflation edge up modestly rather than fall (as was previously expected 6 months ago).
For the Bank of Canada, this complicates things. While markets had been expecting rate cuts, stickier inflation has delayed that path and the BoC will likely keep rates the same for the near future. If inflation continues to surprise to the upside, the Bank may need to consider rate increases later this year or into early next year—not the base case, but a possibility worth keeping in mind.
What this means for markets
This type of environment—moderate but persistent inflation and uncertain rate direction—usually comes with ongoing market volatility. Not to mention the political uncertainty.
We should expect stock and bond markets to remain somewhat choppy through the rest of the year. That said, the underlying fundamentals—economic growth, corporate earnings, and consumer resilience—are still generally positive. So while the path may not be smooth, the broader backdrop remains constructive. Bond yields are now also much higher (with higher interest rates) so the yields on bonds in your portfolios are providing a nice smoothing effect.
The value of independent advice
When relationships shift (like oil and the Canadian dollar) and the outlook becomes less straightforward, having independent advice becomes even more important.
My role is to help you:
Stay focused on long-term strategy rather than short-term noise
Make decisions based on your goals—not headlines
Navigate uncertainty with a clear, objective perspective
If you have any questions or want to talk through how this affects your plan, feel free to reach out anytime.
Now, go enjoy the cherry blossoms!
This material, intended for the exclusive use by the recipients who are allowable to receive this document under the applicable laws and regulations of the relevant jurisdictions, was produced by and the opinions expressed are those of Matthew Ramadan at Monarch Wealth as of the date of this publication, and are subject to change based on market and other conditions. The information and/or analysis contained in this material have been compiled or arrived at from sources believed to be reliable but Matthew Ramadan does not make any representation as to their accuracy, correctness, usefulness or completeness and does not accept liability for any loss arising from the use hereof or the information and/or analysis contained herein. The information in this document including statements concerning financial market trends, are based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons.
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