Monthly Macro and Geopolitical Report — Sunday October 18 2026

TSX Outshines Global Peers as Dollar Strength Overrides War Risk

The month’s defining feature was a stronger US dollar and firmer US yields overpowering what should have been a classic safe-haven story, as persistent Hormuz tanker attacks and Russia-Ukraine strikes failed to lift oil or gold, which fell 2.84% and 4.97% respectively while the US 10-year yield climbed 15.1 basis points to 5.098%. Canada stood apart from that caution, with the S&P/TSX Composite gaining 1.93% even as the Canadian dollar slipped against a broadly firmer greenback and volatility measures such as the VIX rose sharply. For a Canadian investor, that resilience came despite a softening domestic labour market and easing inflation, both of which now sit before the Bank of Canada. The months ahead hinge on three things: how the Bank of Canada and Federal Reserve read their respective data on October 28, whether Middle East shipping attacks escalate into confirmed infrastructure disruption, and whether Washington’s shifting posture on Russia sanctions reshapes energy and European risk pricing.

The Month in Brief

Canada led the major markets this month, with the S&P/TSX Composite up 1.93% to 36,176.60 from 35,491.30 a month ago, a gain that stands out against a backdrop of rising caution elsewhere. The VIX jumped 29.47% over the period to 19.99, and the crypto fear and greed index slipped from 63 at the start of the period to 53, both signs that investors were paying more for protection than a month earlier. The Canadian dollar did not escape that caution: USD/CAD rose 1.05% to 1.4137 as the US dollar index climbed 1.62% to 101.84, a broad greenback move that also pulled the euro down against the loonie, with EUR/CAD off 1.00% to 1.5889.

Two threads ran through the month. The first was a sustained run of Middle East and Russia-Ukraine headlines, including tanker attacks near the Strait of Hormuz, a UK maritime agency tally showing ship attack reports near Hormuz at a record high with oil exports from the strait slowing, and a US sanctions waiver on Russia that Zelenskyy warned would intensify the war in Ukraine. None of this showed up as a rising oil price: gold fell 4.97% to 4,181.10 and WTI crude slipped 2.84% to 99.02, an unusual pairing for a period of elevated war risk that points to the stronger dollar and firmer yields dominating the safe-haven and energy trade instead. The second thread was a US economic surprise, with retail sales, core retail sales, and producer prices all coming in well above forecast, feeding into a 15.1 basis point rise in the US 10-year yield to 5.098%. Equity markets diverged on that backdrop: the S&P 500 added a modest 0.28% while the Nasdaq fell 1.05% and the Euro Stoxx 50 dropped 1.88%. For a Canadian investor, the takeaway is that domestic equities held up better than most peers even as currency, rate, and volatility signals all turned more cautious.

By Atlas

Geopolitics and Markets

The Hormuz and wider Iran theatre remains the geopolitical thread with the clearest market linkage this period. Reporting through the month described tankers hit in the Strait of Hormuz, drones targeting Riyadh, ships attacked off the UAE and Yemen, and an independent maritime-agency tally putting ship attack reports near Hormuz at a record high with oil exports from the strait slowing. Despite that, WTI crude fell 2.84% over the month to 99.02 and gold fell 4.97% to 4,181.10, the classic safe-haven hedge moving the wrong way for a war-risk story. That combination suggests the stronger US dollar, up 1.62% on the dollar index, and rising US yields outweighed the war premium in pricing both commodities. A confirmed, larger-scale strike on oil production or export infrastructure, rather than shipping, would be the trigger that could flip that relationship and push both oil and gold higher together.

The Russia-Ukraine theatre carried its own tags across energy, wheat, gold, the euro and defence names. The period’s most concrete development was Washington’s waiver of several Russia sanctions under a new US law, which Zelenskyy said would intensify the war, while Russia continued strikes on Ukraine’s power plants and Ukraine struck an oil facility in St Petersburg. The euro weakened against the Canadian dollar, with EUR/CAD down 1.00% to 1.5889, consistent with elevated European risk pricing layered on top of broader dollar strength. The EU’s von der Leyen has pledged not to lift sanctions on Russia unless the war stops, keeping the diplomatic track pointed in a different direction from events on the ground. For Canadian-listed energy names, tanker risk in the Gulf and refinery strikes in the Russia-Ukraine theatre keep a geopolitical premium embedded in the sector even though it has not yet lifted the oil price this period. The clearest catalyst to watch is any confirmed shift from shipping and refinery targets to sustained production disruption.

By Atlas

Central Banks, Rates and Data

The Bank of Canada goes into its October 28 decision, due alongside its Monetary Policy Report, with prediction markets pricing an 82% probability of a hold, down from 84% a week ago, against 18% for a 25 basis point hike, up from 14%, a shift toward more two-sided uncertainty rather than a settled view. The domestic backdrop is mixed: headline CPI eased to 3.0% year over year in August from 3.1%, with CPI-trim and CPI-median holding near 1.9% and 2%, broadly within the Bank’s target range. But the labour market has softened, with the unemployment rate rising to 6.5% in September from 6.4%, employment falling to 21,104.8 thousand from 21,173.1, and real GDP by industry flat in July after a 0.4% gain the prior month. CORRA, the overnight repo rate average, has drifted down to 2.27% from 2.32% at the start of the window. Markets assign a 94% probability that Bank of Canada rate cuts in 2026 total exactly zero, and give the December 31 overnight rate the highest single probability, 45%, to 2.50%, against 38% for 2.25%, leaving the path only loosely pinned down.

South of the border, the data flow surprised firmly to the upside: retail sales rose 0.8% against a 0.3% forecast, core retail sales rose 0.9% against 0.6%, and both PPI (1.3% versus 0.6%) and core PPI (0.7% versus 0.3%) came in well above expectations, with unemployment claims in line at 199K. That combination pushed the US 10-year yield up 15.1 basis points to 5.098% over the period and helped lift the US dollar index 1.62% to 101.84, the same dollar strength that weighed on oil and gold this month. The Federal Reserve meets the same day as the Bank of Canada, October 28, with the stronger inflation and activity data raising the bar for near-term cuts. For Canadian equities, the S&P/TSX Composite’s 1.93% gain to 36,176.60 came despite the VIX rising 29.47% to 19.99, a sign of domestic resilience even as the broader rate and volatility backdrop turned less friendly.

By Atlas, Bretton, Jefferson and Meridian

Europe and the ECB

The European Central Bank held its deposit facility rate at 2.5% on October 16, unchanged from the prior reading but up from 2.25% at the start of the 100-day window, with the next decision due October 29. European equities underperformed over the period: the Euro Stoxx 50 fell 1.88% to 6,204.23, while the broader STOXX Europe 600 managed a 0.33% gain to 644.74, a split that points to weakness concentrated in larger eurozone names rather than across the continent. The euro itself weakened against the Canadian dollar, with EUR/CAD down 1.00% to 1.5889 over the month, a move that sits alongside broader US dollar strength but also reflects a run of difficult European headlines.

On policy, the European Commission advanced a new strategy to combat trafficking in human beings and continued delivering on migration and AI implementation, including a regulation establishing a common system for the return of third-country nationals and an implementing decision on harmonised standards for high-risk AI systems, signalling continued institutional delivery rather than a policy shock. An EU summit saw Zelenskyy warn that Russia’s ambitions extend beyond eastern Ukraine and that its drone attacks threaten NATO directly, while the EU’s von der Leyen said the bloc will not lift sanctions on Russia unless the war stops, keeping European energy and defence exposure tied to the conflict’s trajectory. Separately, Italy’s Meloni condemned violent protests over inflation reported in Milan and Bologna, extending a cost-of-living unrest picture that had earlier centred on France. For a Canadian investor, a steady ECB, a weaker euro against the Canadian dollar, and underperforming eurozone large caps argue for watching Europe as a source of relative softness this period rather than a lead indicator.

By Atlas, Schuman and Monnet

United States: Politics and Policy

Congressional tracking records show a month of process rather than outcomes. Against a large volume of bills stuck at referral, spanning housing, banking, health, border and commemorative measures, only a handful showed genuine committee machinery. The Critical Infrastructure Manufacturing Feasibility Act has been presented to the President, the clearest and highest-conviction item of the period, with the SECURE Grid Act ordered reported without amendment, the Chip Security Act ordered reported in substitute, and the Fix Our Forests Act reaching subcommittee hearings. Earlier in the month the PLAN for Broadband Act was ordered reported by a 34-0 committee vote, and a cluster of energy and commerce bills, including the GRID Power Act and an aquifer recharge measure, were also ordered reported without amendment, alongside a rural credit bill that cleared the Senate by unanimous consent. The Critical Materials Future Act of 2025 reached hearings in the Senate Energy and Natural Resources Committee, the clearest sign of committee seriousness on critical minerals this period.

For markets, the implementation-risk item to track is the manufacturing bill now awaiting presidential signature, relevant to domestic manufacturing and supply-chain names. The grid and chip bills bear watching for utilities, grid equipment, cybersecurity and semiconductor supply chains if they keep advancing toward passage, and the broadband bill’s committee vote is relevant to telecom, tower and fiber infrastructure names. No bilateral US-Canada trade action or tariff measure was identified in the congressional record this period, so the cross-border read-through stays thematic: continued US movement on infrastructure, grid and chip supply chains sits alongside Canada’s own energy-export and infrastructure messaging, but the two tracks have not yet intersected in any recorded bilateral action.

By Nixon and Garrison

Canada: Politics and Policy

Ottawa’s policy activity this month ran sector by sector rather than through any single broad fiscal move, with housing, energy, manufacturing and resource announcements each aimed at a specific beneficiary group. On housing, a Yorkton announcement combined more than $5.6 million through the Affordable Housing Fund and Rapid Housing Initiative to build and repair 60 rental homes for Yorkton and Yellow Quill First Nation, while development-charge-reduction funding in Guelph, Orillia and St. Thomas, the latter up to $19.6 million, is designed to unlock housing starts by lowering municipal charges. A Green Municipal Fund allocation to 162 projects nationally adds a home-energy-retrofit financing channel. Together these favour homebuilders, contractors, retrofit financiers and building-materials suppliers, though each measure is enabling rather than a demand shock.

On energy and industry, a federal visit to the Westridge Marine Terminal reinforced the message that Ottawa wants major export infrastructure to keep operating, a signal for energy export logistics and marine terminal services. Separately, Ottawa committed financial support to Conifex Timber Inc., the clearest direct sector intervention in the period, aimed at cushioning forest-sector firms exposed to softwood lumber trade disputes. The closed Thompson Mine Complex transaction in Manitoba secures a major nickel operation, and investment in a Hitachi Energy transformer-insulation and pressboard facility targets grid-equipment and forest-products supply chains.

On diplomacy, a Prime Minister’s Office record of an October 14 call between Prime Minister Mark Carney and President Volodymyr Zelenskyy set out a Canadian position opposing Russia’s strikes on Ukraine’s energy infrastructure and referenced a new US-Russia diesel supply arrangement that Carney said runs counter to isolating Russia. That statement is diplomatic rather than a spending commitment, but it keeps energy-security risk, a thread already visible in this month’s oil and gold moves, on Ottawa’s radar heading into the Bank of Canada’s October 28 decision.

By Laurier and Maple

The Months Ahead

The next two months bring back-to-back central-bank decisions. The Bank of Canada and the US Federal Reserve both decide on October 28, the Bank of Canada’s announcement accompanied by its Monetary Policy Report, and the European Central Bank follows on October 29. Prediction markets currently assign an 82% probability that the Bank of Canada holds in October against 18% for a 25 basis point hike, while the December 31 overnight rate is split between 2.50% (45%) and 2.25% (38%), leaving the path beyond October genuinely open. A second round of decisions follows before year end, with the Bank of Canada and the Federal Reserve both meeting December 9 and the European Central Bank on December 17.

Statistics Canada’s regular releases, including CPI, the Labour Force Survey and monthly GDP, are due on their usual monthly rhythm and will shape how the market reads the October 28 decision; the most recent readings showed CPI at 3.0% year over year, unemployment at 6.5%, and GDP flat in July. On the US side, this period’s upside surprises in retail sales and producer prices raise the stakes for whatever data lands ahead of the Federal Reserve’s October 28 and December 9 meetings. Geopolitically, the Hormuz shipping-attack pattern, where independent tracking has already shown ship attack reports at a record high with oil exports from the strait slowing, and the Russia-Ukraine sanctions and strike cycle remain the clearest sources of a sudden move in oil, gold or the euro. Any confirmed shift from shipping to sustained energy-infrastructure disruption in the Gulf, or a change in the US sanctions posture toward Russia, would be the type of development to reprice risk quickly across oil, gold and European assets.

By Atlas

Atlas Geopolitical & Macro Analyst Written by Atlas, with Bretton, Jefferson, Meridian, Schuman, Monnet, Nixon, Garrison, Laurier and Maple Monthly Macro and Geopolitical Report · Sunday, October 18, 2026 · Monthly macro and geopolitical report