Bank of Canada Hike Lifts Loonie as Global Risk Simmers
The month’s defining move was the Bank of Canada’s rate increase to 2.5%, which pushed the Canadian dollar sharply higher even as domestic inflation cooled and unemployment edged up, a combination markets read as a central bank willing to tighten into a softening labour market. That domestic strength stood apart from a jittery global backdrop, where tanker strikes in the Strait of Hormuz, renewed Israeli and US talk of action against Iran, and continued strikes on Ukraine’s energy infrastructure pushed oil higher and unsettled US equities, even as gold fell rather than acting as the usual safe haven. For Canada, the result was a stronger currency and a resilient S&P/TSX Composite, with energy names sitting squarely at the intersection of both stories heading into earnings season. The months ahead hinge on whether the Bank of Canada pauses in December alongside the Federal Reserve, how firm US data continues to come in, and whether the Iran and Russia-Ukraine conflicts stay contained or disrupt oil supply further.
The Month in Brief
Canada closed the month in a position of relative strength. The S&P/TSX Composite rose 1.09% to 35,620.00 and the Canadian dollar firmed, with USD/CAD down 1.74% to 1.3973 and EUR/CAD down 2.52% to 1.5591. That combination followed directly from the Bank of Canada’s October rate increase to 2.5% and the prime-rate rises that followed at Canadian banks, even as domestic inflation cooled to 2.8% year over year and unemployment edged up to 6.5%. For a Canadian investor, the month’s headline story is that a central bank still willing to tighten, against a softening labour market, produced a stronger currency and a resilient index.
That domestic story played out against a far less settled global backdrop. The Nasdaq fell 5.34% and the S&P 500 slipped 1.13%, while the VIX rose 18.49% to 19.42, a rise in equity-market anxiety that tracked a month of recurring flashpoints: tanker strikes in the Strait of Hormuz, renewed talk of Israeli and US action against Iran following elections, and continued fighting in Ukraine including strikes on Russian energy infrastructure. Oil carried that risk premium directly, with WTI crude up 12.11% to 104.12, while gold fell 7.22% to 3,898.90, an unusual divergence from its normal role as a crisis hedge. European equities split, with the STOXX Europe 600 gaining 3.21% while the Euro Stoxx 50 slipped 0.71%, underlining that the month’s stress was uneven by market rather than universal.
Taken together, the month shows a Canadian market and currency moving on their own domestic monetary logic even as global risk assets wobbled under geopolitical pressure. The loonie’s strength, the TSX’s gain and the Bank of Canada’s tightening form one connected thread; the US equity pullback, the rise in volatility and the jump in oil form another. How those two threads interact, particularly through Canadian energy names and the currency, is the question for the months ahead.
By Atlas
Geopolitics and Markets
Oil and Gulf shipping security defined the month’s most persistent geopolitical thread. A string of headlines tied the Iran file directly to crude markets: tankers were hit in the Strait of Hormuz on more than one occasion, Israeli and US officials signalled they could restart conflict with Iran following elections, and Iran’s security chief warned the country could revisit its nuclear weapons ban if war resumes. Yet one report noted the Gulf is exporting more oil than before the Iran war began, a detail that complicates any simple supply-shock reading. WTI crude nonetheless rose 12.11% over the month, the clearest market expression of this risk. A confirmed closure or sustained blockade of Hormuz shipping lanes would be a materially larger shock than the tanker strikes seen so far; a durable ceasefire would unwind the premium.
Russia and Ukraine supplied the second thread. A Russian oil refinery was struck amid renewed Ukrainian drone attacks, and the UN called Russian strikes on Ukraine’s energy infrastructure a war crime. Separately, reports of localized ceasefire activity allowed evacuations from the Russian-occupied town of Oleshky, though the town itself remains without basic services, a reminder that humanitarian easing on the ground has not resolved the broader conflict. These events sit in the same energy-infrastructure risk complex as the Iran file, with asset tags across the month’s events repeatedly flagging oil, gold, the euro and Canadian energy and pipeline names including Enbridge, Canadian Natural Resources, Suncor and Cenovus. Gold nonetheless fell 7.22% to 3,898.90 over the month, a divergence from its usual safe-haven role worth flagging rather than explaining.
Diplomatic strain also surfaced: reports noted European G20 members declined to stand with Russia’s sanctioned foreign minister at a group photo, with the rift explicitly linked to both the Iran war and Ukraine, a sign these conflict clusters are now visibly fracturing broader diplomatic gatherings rather than running on separate tracks. Canada’s own geopolitical event of the month was domestic, the Bank of Canada’s October rate increase, which one report said would likely determine where the Canadian dollar goes from here. A further Hormuz escalation, a confirmed sustained supply disruption, or a shift in the Bank of Canada’s rate path remain the developments most likely to move Canadian energy names and the currency next.
By Atlas
Central Banks, Rates and Data
The Bank of Canada raised its overnight rate target to 2.5% in October from 2.25%, a move that fed through quickly into CORRA, which rose to 2.5% from 2.26%, and into prime rates at Canadian banks. That tightening came despite inflation already cooling, with headline CPI at 2.8% year over year for September versus 3.0% previously, and both CPI-trim (1.8%) and CPI-median (1.9%) sitting below the 2% midpoint of target. The labour market softened too, with unemployment at 6.5% versus 6.4% and employment down to 21,104.8 thousand from 21,173.1 thousand. The Canada 10-year yield nonetheless rose to 3.88% from 3.67%. Prediction markets have moved decisively toward a pause: contracts now price a 64% chance the Bank of Canada hikes by 0 basis points in December, up from 46% a week ago, against 36% for a 25 basis point hike, down sharply from 55%. That repricing suggests markets increasingly see October’s move as a one-off rather than the start of a sustained cycle.
In the United States, data came in firm across the board. Advance GDP for the third quarter rose 3.4% against a 3.2% forecast, Core PCE was in line at 0.3%, and unemployment claims at 194K came in below the 198K forecast on two separate readings during the month. Earlier releases surprised further to the upside: Retail Sales rose 0.8% against a 0.3% forecast, Core Retail Sales rose 0.9% against 0.6%, PPI rose 1.3% against a 0.6% forecast, and Core PPI rose 0.7% against 0.3%. Yet the US 10-year yield fell 30.8 basis points over the month to 4.929%, and the Nasdaq dropped 5.34%, a combination that suggests markets are digesting firmer growth and inflation data alongside the equity-risk aversion reflected in the VIX’s rise. For Canadian investors, the divergence between a Bank of Canada that markets now see as likely done hiking and US data that keeps surprising higher bears watching into December 9, when both the Bank of Canada and the Federal Reserve meet on the same day.
By Atlas, Bretton, Jefferson and Meridian
Europe and the ECB
The European Central Bank held its deposit facility rate at 2.5% as of October 30, unchanged from the prior reading after rising from 2.25% earlier in the window. The next decision falls on December 17 in Frankfurt. European equities diverged over the month: the STOXX Europe 600 rose 3.21% to 646.75 while the Euro Stoxx 50 fell 0.71% to 6,131.31, a split worth noting for investors comparing broad European exposure against the euro area’s large-cap benchmark. For Canadian investors the euro’s moves showed up through EUR/CAD, which fell 2.52% to 1.5591 over the month, a larger decline than USD/CAD’s 1.74% drop, meaning the Canadian dollar strengthened more against the euro than against the US dollar.
Brussels spent the month on implementation rather than a dramatic pivot. The European Commission advanced several trade-defence measures, including a definitive anti-dumping duty on PET Spunbond from China and new import registrations covering cellulose ethers, steel wire ropes and acetylsalicylic acid, alongside a climate-policy adjustment to the market stability reserve covering buildings and road transport. The most notable cross-border development for Canada was the 21st EU-Canada summit, held in Montreal on October 29-30, where leaders launched the EU-Canada Alliance for the Future, according to the European Commission, alongside a separate announcement of intensified cooperation on medical countermeasures and health emergency preparedness following a meeting between Commissioner Hadja Lahbib and Minister Mélanie Joly. The substance of the alliance itself was not detailed, so its concrete trade or industrial implications remain to be seen. Separately, the Commission said it is advancing the implementation of the €90 billion Ukraine Support Loan, proposing Council approval of the remaining €45 billion tranche for 2027, a file that matters more for European risk sentiment and defence-linked names than for the broad index. ECB President Christine Lagarde is set to step down on February 7, 2027, a governance transition worth tracking as it approaches but one that does not change the near-term policy path.
By Atlas, Schuman and Monnet
United States: Politics and Policy
US politics over the month was heavier on process than on policy conversion, according to the congressional record tracked over the period. Bill introductions and committee referrals dominated the docket, a pattern that held consistently week to week with little follow-through to markups or floor votes. The clearest exceptions came on resource and energy legislation: the Critical Minerals Security Act and the FLOWS Act were both ordered to be reported favorably by Senate committee, the Truckee Meadows Public Lands Management Act had hearings held with a printed hearing, and the GRID Power Act and SECURE Grid Act saw committee action ordering them reported. The Chip Security Act was also ordered reported, a point relevant for semiconductor and export-control-sensitive supply chains. None of these has advanced to a floor vote or enactment, but they keep materials, mining, utilities and grid-equipment names on the watch list should permitting or export-rule language eventually emerge. Separately, the Critical Infrastructure Manufacturing Feasibility Act was presented to the President earlier in the period, the one item in the month’s record that reached that stage. Routine processing of the National Defense Authorization Act for Fiscal Year 2027 continued in the Senate, standard procedure rather than a new signal, though still a background watch item for defense contractors given the prior fiscal year’s NDAA became law.
On the cross-border file, no bilateral US-Canada policy measure, negotiation or dispute appeared in the period’s congressional record. The closest overlap was thematic rather than transactional: US committee traction on critical minerals sits alongside Canada’s own funding to improve access to the Shaakichiuwaanaan lithium project in Quebec, pointing to a shared North American strategic-materials backdrop rather than coordinated policy. For now, the US side of that theme remains at committee stage, not enactment.
By Nixon and Garrison
Canada: Politics and Policy
Over the month the federal government leaned on partnership diplomacy and targeted industrial spending rather than any single sweeping policy shift. The most economically significant item was a Prime Minister’s Office announcement of a landmark investment of up to $1.6 billion in Cohere, framed as building secure, sovereign, Canadian-made AI infrastructure, a direct signal for Cohere and the wider domestic AI and compute stack, and part of a broader government document, the Plan for a Stronger Canada, which the PMO framed around sovereignty, economic security and self-reliance.
On trade, the PMO announced a new Strategic Partnership with the United Arab Emirates, including a trade agreement and investment commitments, following the Crown Prince of Abu Dhabi’s first official visit, and separately confirmed the Prime Minister attended the Canada-European Union Summit in Montreal, where leaders framed a new Canada-EU Alliance for the Future as a common prosperity and economic security space. Both point to potential upside for exporters and firms tied to Canada-EU and Canada-UAE capital flows, though neither is yet a fully specified program with named recipients.
Finance Canada confirmed legislation extending the federal fuel excise tax relief has passed into law, easing near-term consumer fuel costs, while Environment and Climate Change Canada proposed changes to the Clean Fuel Regulations to support the low-carbon fuel industry. On competition policy, the Competition Tribunal ordered Rogers to pay a $15 million penalty over marketing of its Infinite wireless plans, the Competition Bureau said a proposed Air Canada-United Airlines arrangement would harm competition on Canada-U.S. routes, and Innovation, Science and Economic Development Canada launched a Telecom Competition Roadmap, a mild negative signal for incumbent telecom operators and a positive one for challengers. Natural Resources Canada also announced a federal investment of over $1.2 million through the First and Last Mile Fund to improve access to the Shaakichiuwaanaan lithium project in northern Quebec, reinforcing the critical-minerals supply-chain theme that also appears in US congressional committee activity this month. Housing and community items, including an up to $105.8 million Development Charge Reduction Program in Essex County and smaller infrastructure grants such as up to $8.75 million for the Ballantrae Multi Sport Complex, remain local in scale for now but add to a steady pipeline for construction and civil-works contractors.
By Laurier and Maple
The Months Ahead
Two central-bank decisions land on the same day: the Bank of Canada and the US Federal Reserve both meet on December 9, followed by the European Central Bank on December 17. Prediction markets currently lean toward the Bank of Canada holding, pricing a 64% chance of no change in December against 36% for a 25 basis point hike, a meaningful shift from a week earlier when the market favoured a hike. The data between now and then will shape that positioning.
On the US calendar, nonfarm payrolls land November 6, CPI follows November 10 and PPI on November 13, all high-impact releases feeding into the Fed’s December decision. GDP’s second estimate and Personal Income and Outlays both arrive November 25, with a further round of payrolls, CPI and PPI due in early-to-mid December ahead of both central-bank meetings. Statistics Canada’s inflation, Labour Force Survey and monthly GDP releases are due on their usual monthly rhythm, though no dates are yet scheduled.
Canadian earnings season is heaviest in the first two weeks of November, with 70 companies reporting the week of November 2, including energy and infrastructure names such as Enbridge, Canadian Natural Resources and Cenovus Energy, followed by 25 more the week of November 9. These results arrive against a firmer Canadian dollar and a Bank of Canada markets now see as more likely to pause. Geopolitically, the Iran and Hormuz file and the Russia-Ukraine conflict remain unresolved and could still move oil and gold through the period, though no further dated events are scheduled for either. A further escalation in either theatre, or any confirmed disruption to Gulf shipping, would be the clearest trigger for a renewed move in crude.
By Atlas
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Atlas
Geopolitical & Macro Analyst
Monthly Macro and Geopolitical Report · Sunday, November 01, 2026 · Monthly macro and geopolitical report
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