Canada’s imports rose to $72.05bn in February, up from $66.13bn in the previous period.
This shows an increase of $5.92bn between the two periods.
We see the significant jump in February’s imports as a clear signal of robust domestic demand within the Canadian economy. This strength, however, increases the trade deficit and puts downward pressure on the Canadian dollar. Traders should anticipate further weakness in the CAD against the USD in the near term.
This economic strength complicates the outlook for the Bank of Canada, making a near-term interest rate cut less likely. With the latest March CPI data showing inflation holding firm at 2.9%, the Bank has little reason to ease policy. We are positioning for the overnight rate to remain unchanged through the second quarter.
The widening trade deficit, now at its largest since the third quarter of 2025, confirms this negative outlook for the currency. The market is currently pricing the USD/CAD exchange rate around 1.3650. We view call options on USD/CAD with a strike price of 1.38 as an attractive strategy for the coming weeks.
This surge in consumer and business spending marks a sharp acceleration from the more modest growth trends we observed throughout most of 2025. The data suggests the Canadian economy entered 2026 with more momentum than we had previously forecast. This may lead to upward revisions in GDP growth estimates, which could impact equity index futures.
