CAD: Macro trends and outlook
Wholesale trade data for December highlights a resilient end to the year as sales increased 2.0% to reach 86.1 billion dollars. This recovery was largely driven by a strong rebound in the automotive subsector which jumped over 9% after enduring months of production delays. At the same time the mineral and precious metals industry reached record levels as both prices and demand surged during the holiday period. Although certain categories like food and beverages experienced a slight decline the overall wholesale sector finished 2025 with a total volume exceeding one trillion dollars which suggests that domestic commerce remains active despite broader economic pressures.
This trade momentum contrasts with a more complicated inflation story as the January consumer price index slowed to 2.3%. While the headline figure benefited from a massive drop in gasoline prices the underlying core inflation measures remained stuck at 3.0%. This persistent price pressure indicates that the path back to price stability will be a bumpy one for the Bank of Canada. Consequently the central bank has maintained a pause on its easing cycle with the policy rate sitting at 2.25% as officials wait for more definitive signs that the domestic economy is cooling enough to hit their targets.
Beyond the immediate data points the overall macro sentiment is being shaped by long standing structural concerns regarding productivity and investment. Canada currently faces a prosperity gap as labor productivity sits at only 70% of the levels seen in the United States while capital continues to flow into real estate rather than export industries. Even though the equity market saw impressive gains last year led by a record breaking surge in gold stocks there are emerging headwinds on the horizon. The prospect of the first annual population decline in modern history presents a unique challenge that could weigh on domestic consumption and further separate Canada from the growth trajectory of its southern neighbor.
The impact of these domestic and structural factors is most evident in the foreign exchange markets where the Canadian dollar remains a clear underperformer. While other major currencies have shown signs of strength the Loonie continues to lag the rest of the G10 group as it softens and sustains the 1.36-1.37 level against the American dollar. Without a significant improvement in private sector momentum or a clearer path toward economic revitalization the currency is caught between a rock and a hard place, needing a narrower yield spread to rise but lacking the underlying economic strength to support a stronger level.
GBP: Pound loses its floor
Sterling weakened across major pairs yesterday after a softer than anticipated labour market report, before steadying ahead of this morning’s inflation release. The data showed further signs of easing, but not enough to satisfy markets. Headline inflation fell from 3.4% to 3% as expected, while core and services measures fell by 0.1 percentage point to 3.1% and 4.4% respectively, which was not as low as consensus (3% and 4.3% expected). While the moderation broadly validates the Bank of England’s dovish tilt, anchored in its projected disinflation path, stickiness in service inflation will have piqued hawks’ attention. Price action in GBP/USD and GBP/EUR remained relatively muted.
This is unsurprising. We had noted that the expected drop in headline inflation was large and already priced in, limiting the scope for additional bearish pressure unless the print surprised to the downside. Sterling also absorbed heavier selling in yesterday’s session, setting the bar higher for fresh downside momentum. In fact. GBP/EUR closed below the 100‑day moving average yesterday, which had held as key support since December, while also closing below the most recent higher low at 1.1440 from 9 February. This marks the invalidation of the steady bullish uptrend the pair had been on since November. While this evolution in the pair’s technical setup is not necessarily indicating an imminent bearish reversal, it is signalling growing vulnerability to downside risks for sterling.
In GBP/USD, the pair found support at the 50‑day moving average yesterday after falling 0.4%, with the dollar drawing strength from renewed Middle East tensions. That support looks less robust than the technical structure in GBP/EUR, as the move lower in cable continues to be driven by an unwinding of crowded shorts against the dollar. For the remainder of the week, retail sales and PMIs on Friday will be key. The latest readings were a pleasant surprise, and a confirmation of that momentum could help limit sterling’s vulnerability to further selling for the week.
EUR: Lagarde expected leave ECB early
The euro is slightly softer this morning, with only a muted reaction to reports that ECB President Christine Lagarde may step down before her term ends in 2027. The lack of market response suggests investors are weighing not just the prospect of a more hawkish successor, but also the risk of a leadership vacuum at a delicate point in the policy cycle. Isabel Schnabel has been floated as a potential candidate, though Lagarde has previously noted that legal advice indicates sitting Executive Board members may be ineligible for the presidency.
On the data front, Germany’s ZEW survey slipped to 58.3 in February from January’s four‑year high, well below expectations. The broadly steady but softer reading underscores how fragile the recovery remains in Europe’s largest economy, with structural drags in industry and investment still unresolved.
Near term, EUR/USD continues to trade above fair value and looks vulnerable to a drift lower in the absence of a clear catalyst. That said, with US data hardly convincing, sellers still lack a strong fundamental case for a sustained break lower. A dip through the 21‑day moving average around 1.1839 wouldn’t surprise, but the broader bullish configuration remains intact for now, with the February lows near 1.1766 offering solid support.
Market snapshot
Table: Currency trends, trading ranges & technical indicators
Key global risk events
Calendar: February 16 – 20
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
