The commodity-linked Canadian dollar strengthened against its U.S. counterpart on Wednesday as oil prices jumped and investors raised bets on a Bank of Canada interest rate hike this year.
The loonie was trading 0.2% higher at 1.4170 per U.S. dollar, or 70.57 U.S. cents, after moving in a range of 1.4156 to 1.4210.
“The CAD has performed relatively well through the overnight volatility,” Shaun Osborne and Eric Theoret, strategists at Scotiabank, said in a note. “Negative CAD sentiment is moderating but spot remains quite elevated.”
The price of oil, one of Canada’s major exports, rose 5.2% to US$74.10 a barrel after U.S. President Donald Trump said an interim agreement to end the war with Iran was “over” and that the United States was likely to launch new strikes on Wednesday night. Stock markets globally fell as the jump in oil prices stoked worries about the inflation outlook and the prospect of tighter monetary policy.
Investors see a roughly 60% chance the BoC will raise interest rates this year, up from 40% on Tuesday, swap market data showed.
In the options market, three-month USD-CAD risk reversals were trading at an implied volatility of 0.14 percentage points in favor of calls over puts, marking the lowest premium for the greenback since June 3.
“The declining premium for USD calls suggests markets have taken the early July USMCA developments in their stride and might point to some modest upside potential in the CAD,” the strategists said. Last week, the U.S. declined to extend the United States-Mexico-Canada Agreement, seeking changes to the trade deal.
Canadian bond yields moved higher across the curve. The 10-year was up as much as 9.5 basis points at 3.590%, its highest level since May 21.
Meta Platforms Inc. META-Q -2.11%decreaseplans to spend more than $13-billion to build a massive artificial intelligence data centre in Sturgeon County, Alta., north of Edmonton, marking the technology company’s first such facility in Canada.
Meta described the data centre in a news release as a 1-gigawatt facility, referring to the amount of electricity it will consume. For comparison, the city of Edmonton draws about 1.4 gigawatts. The data centre campus will be built on 1,750 acres of land, according to a company spokesperson, well over the size of Stanley Park in Vancouver.
To meet the electricity needs of the data centre, Pembina Pipeline Corp., Morgan Stanley Infrastructure Partners and Kineticor Asset Management are constructing a $4.6-billion natural gas plant in Sturgeon County. Dubbed the Greenlight Electricity Centre, the project was first announced last year, with Pembina and its partners saying the plant would serve an unnamed data centre customer.
Meta, which owns Facebook and Instagram, did not publicly confirm its involvement until Wednesday.
The company the data centre will employ more than 3,000 workers at the peak of construction and more than 300 jobs once operational in two to three years. Meta is promising to cover the full electricity costs of the data centre, including for new and upgraded infrastructure. It will use an efficient cooling system to reduce water use, the company said, adding that water consumption will be limited to fire safety and equipment maintenance.
Meta, which got its start in social media, is now among the largest developers of AI, and spending big on the infrastructure to power it. The company said earlier this year that its capital expenditures in 2026 will total between US$125-billion and US$145-billion, while chief executive officer Mark Zuckerberg has spent lavishly to recruit AI researchers to its Meta Superintelligence Labs division.
Growing AI adoption and development is leading to unprecedented demand for new data centres, which are large facilities filled with sophisticated computer chips to build and run AI models. Much of the construction is occurring in the United States. Around 70 data centre proposals have been announced in Canada since 2024, but only a handful have started construction, according to data from Aterio, a Vancouver-based company that tracks the industry.
The Alberta government, meanwhile, has been courting tech companies the past couple of years and pitching the province’s abundant natural gas resources as a way to power energy-hungry data centres. Rather than rely exclusively on electricity from the provincial grid, which could compromise reliability and raise prices for consumers, developers are encouraged to build their own power generation capacity.
Pembina has said that the Greenlight power facility will be operational in the second half of 2030, while Meta aims to have its data centre online sooner. To bridge the gap, the Alberta Electric System Operator, which manages the grid, last year allocated more than 900 megawatts of electricity to the Greenlight proponents, allowing the data centre to get online beforehand.
AESO is proposing to allot a further 1.6 gigawatts of electricity to developers building their own power generation facilities so that data centres can become operational beforehand.
Some data centre proposals have run into trouble. The Alberta Utilities Commission rejected an application for a massive development in the town of Olds earlier this year filed by Synapse Real Estate Corp. for containing “significant deficiencies.” The company reapplied, but the commission is still seeking more information from Synapse. Some residents have been vocal in opposing the project, too.
Indeed, data centre proposals have been met with community resistance in other parts of the country, as some Canadians are concerned about the environmental impact of these facilities, as well as the noise they can generate. In June, Manitoba Premier Wab Kinew shot down a large-scale data centre planned for an area southeast of Winnipeg. “There’s a big threat to the environment and not much benefit to the economy,” he said at the time.
Toyota is investing $3.6 billion to expand its San Antonio, Texas, assembly plant, a move expected to create about 2,000 new jobs and bring Toyota Tacoma pickup production from Mexico to the Lone Star State.
The automaker announced Monday that it will build a second vehicle assembly line at its San Antonio campus, allowing the facility to assemble the Tacoma alongside the Tundra and Sequoia.
As part of the expansion, Tacoma production will gradually transition from Toyota’s Baja California plant in Mexico over the next four years, according to the company. Toyota will continue producing Tacoma pickups at its Guanajuato, Mexico, plant.
The project will add about 2.5 million square feet to the manufacturing campus, effectively doubling the site’s size by 2030 and bringing Toyota’s total investment in the San Antonio operation to $8.3 billion since construction began in 2003. Toyota previously moved Tacoma production from San Antonio to its Guanajuato plant in 2020.
Workers stand by the assembly line at the new rear axle plant at Toyota Texas in San Antonio on March 2, 2026. (Katina Zentz/San Antonio Express-News via Getty Images)
Toyota said the investment reflects its confidence in North America’s workforce, innovation and long-term growth potential. The expanded facility will also incorporate advanced manufacturing technologies designed to increase production flexibility.
The announcement is another major manufacturing win for Texas, which has attracted billions of dollars in industrial investment in recent years as companies cite the state’s business-friendly policies, workforce and available land. Gov. Greg Abbott said the expansion, supported by the Texas Enterprise Fund and JETI program, will qualify for a $20 million state grant and other incentives and reinforces Texas’ position as a leading destination for advanced manufacturing.
President Donald Trump said the U.S. ceasefire with Iran was over after a blow-up in hostilities this week, with both sides accusing each other of violating the temporary truce.
Later, Trump said the U.S. will “very probably” attack Iran “hard again tonight.”
Trump also signaled the U.S. would reimpose its naval blockade in the Strait of Hormuz.
He later seemed to downplay the nuclear threat posed by Iran, while ruling out the need for any U.S. troops on the ground in the country. Trump had justified starting the war with Iran by citing concerns about it being poised to develop a nuclear weapon.
The U.S. trade deficit widened sharply in May as an artificial intelligence investment boom helped to drive imports of capital goods to a record high, suggesting that trade remained a drag on gross domestic product in the second quarter.
The trade gap jumped 42.2 per cent to US$77.6-billion, the Commerce Department’s Bureau of Economic Analysis and Census Bureau said on Tuesday. Economists polled by Reuters had forecast the deficit at US$78.5-billion.
Imports increased 3.3 per cent to US$395.3-billion, with imports of capital goods soaring to a record high US$128.0-billion.
Businesses are spending heavily on AI, whose buildup is heavily reliant on imports. Exports dropped 3.2 per cent to US$317.7-billion, though shipments of petroleum were the highest on record amid the Middle East conflict. The U.S. is a net oil exporter.
Trade has subtracted from GDP for two straight quarters. The Atlanta Federal Reserve’s model is currently forecasting GDP increasing at a 1.2-per-cent annualized rate in the second quarter. The economy grew at a 2.1-per-cent pace in the January-March quarter.
Canada’s trade surplus hit a four-year high in May as the conflict in the Middle East buoyed oil and other global commodity prices and aluminum exporters found new markets.
Merchandise exports rose 0.9 per cent, the fourth consecutive monthly increase, to a record $77.1-billion, Statistics Canada reported Tuesday. Imports declined 0.2 per cent.
That pushed Canada’s trade surplus with the rest of the world to $4.2-billion, from an upwardly revised $3.4-billion in April. That’s the largest trade surplus since May, 2022, and the second largest surplus since the summer of 2008, just before the global financial crisis.
Meanwhile, Canada’s trade surplus with the United States widened to $11.6-billion from $10.3-billion in April, the largest surplus since January, 2025, when Canadian companies tried to front-run President Donald Trump’s incoming tariffs.
The run of strong export data in recent months has been driven by the spike in global oil prices, caused by the U.S.-Iran war and the closing of the Strait of Hormuz to oil tanker traffic. After posting a towering $5.3-billion trade deficit in February, Canadian exports have jumped 22-per-cent over four months, leading to a string of trade surpluses.
Most of the increase has been driven by higher prices, not greater shipment volumes. In real (price-adjusted) terms, exports in May were essentially flat.
“Canadian trade surpluses can come and go quickly with swings in oil prices, and this is probably the high watermark for now,” Bank of Montreal senior economist Robert Kavcic wrote in a note to clients. “Still, net exports look to add firmly to growth in Q2, another data point that suggests the Canadian economy has snapped out of its two-quarter funk.”
Since Washington and Tehran announced a peace agreement in mid-June, the price of a barrel of West Texas Intermediate crude has fallen to around US$70 – well below the US$90 to US$110 range in May.
Canadian energy exports actually declined 2 per cent in May compared to April. However, this was more than offset by a 16-per-cent increase in metal ores and non-metallic mineral exports, led by a jump in sulphur exports.
“This increase occurred in a context of constrained global supply, as sulphur shipments transiting through the Strait of Hormuz have slowed since the conflict in the Middle East began,” Statistics Canada said.
Aluminum exports rose 50.7 per cent to reach $1.2-billion, the highest export value since May, 2022. This increase was led by shipments to the Netherlands, Italy and Greece.
The aluminum market has been upended by U.S. tariffs on the metal as well as the closing of the Strait of Hormuz. Around 10 per cent of global aluminum production comes from countries in the Persian Gulf and aluminum prices rose sharply this spring.
Beyond increased aluminum shipments to Europe, there were few signs of the federal government’s trade diversification agenda in the May numbers. Exports to the U.S. rose 1.5 per cent, the fourth consecutive monthly increase.
Exports to the rest of the world declined 0.3 per cent, after a sharp 4-per-cent drop in April. Most of the trade diversification story over the past year has been about higher gold prices and greater gold shipments to the United Kingdom. This has slowed in recent months.
Overall, exports rose in seven out of 11 categories, including consumer goods, chemical, plastic and rubber products, and food products.
Imports declined 0.2 per cent in May, driven by a large drop in the value of metal imports, including gold, iron and steel and scrap metal. Looking beyond metals, imports actually increased in nine out of 11 sectors.
“Trade flows continue to be shaped by uncertainty surrounding U.S. trade policy, although our broader expectation remains that trade will become less of a drag on Canadian growth than it was in 2025 as the international environment gradually stabilizes,” Royal Bank of Canada economists Abbey Xu and Nathan Janzen wrote in a note to clients.
“The recent CUSMA joint review did little to change our base-case outlook that North American trade rules will remain broadly intact, though negotiations are likely to remain an important source of uncertainty,” they wrote, referring to trade pact between Canada, Mexico and the United States.
Last week, the Trump administration opted not to extend the trade agreement for another 16 years. The deal remains in place but moves into a period of annual reviews until 2036. Trade negotiations among the three countries are expected to continue over the summer.
Main TSX driver for week ending Friday, July 10, 2026: Canada’s June employment report on July 10 at 8:30 ET; a strong print could lift banks/consumer cyclicals but raise rate-risk, while a weak print could support gold/defensives but hurt growth sentiment.
U.S. Fed minutes on July 8 are the key external macro event; markets are looking for confirmation that the weaker U.S. labour data reduced near-term Fed hike risk.
Materials led the TSX last week as gold and copper rallied; if metals hold, miners remain the highest-beta support for the index.
Energy is the main swing risk: WTI was around US$68.78 and Brent US$71.94 on July 3, with prices pressured by easing Hormuz supply concerns and possible OPEC+ supply increases.
TSX setup: near-record levels after closing 35,274.84 on July 3, so upside needs confirmation from metals, Canadian jobs, and Fed-rate expectations; disappointment could trigger profit-taking.
Key Drivers
1. Canada jobs report — July 10
This is the most important domestic event for the TSX this week.
Result
Likely TSX impact
Sector impact
Strong jobs, lower unemployment
Mixed to positive
Banks, insurers, consumer discretionary positive; rate-sensitive REITs/utilities may lag
Weak jobs, higher unemployment
Mixed to negative
Gold miners and defensives may outperform; banks and cyclicals may weaken
In-line jobs
Neutral
TSX likely follows commodities and U.S. Fed signals
May employment was strong: Canada added 87,800 jobs and unemployment fell to 6.6%, beating expectations. That makes the June report important because markets will test whether May was a rebound or a one-off.
2. U.S. Fed minutes — July 8
The Fed minutes matter because TSX valuation is sensitive to U.S. bond yields, the Canadian dollar, gold, and global risk appetite.
Recent U.S. payrolls were weak: June nonfarm payrolls rose only 57,000, below expectations, and the unemployment rate fell to 4.2%. Markets interpreted this as reducing the probability of a near-term Fed hike.
TSX read-through:
Fed tone
TSX effect
Less hawkish
Positive for gold, tech, utilities, REITs; supportive for TSX multiple
Still hawkish
Negative for gold and rate-sensitive stocks; banks may hold up better
Unclear
More volatility; TSX follows commodities
3. Gold and copper momentum
The TSX rally into July 3 was heavily supported by gold and copper. Reuters reported that the TSX closed at a two-week high on July 3, with mining shares leading as gold and copper gained on lower Fed-hike expectations.
Copper strength supports base metals and industrial cyclicals.
A stronger U.S. dollar or hawkish Fed minutes would pressure both.
4. Oil, Hormuz, and OPEC+
Energy is the risk to the upside and downside. Oil has eased as U.S.-Iran peace efforts and partial reopening of Hormuz reduced supply fear. Reuters reported Brent at US$71.94 and WTI at US$68.78 on July 3, with prices nearly unchanged for the week.
OPEC+ is also expected to consider another output-target increase for August, reportedly around 188,000 barrels/day, which could cap crude prices if demand remains soft.
Oil move
TSX impact
WTI rebounds above US$72
Positive for CNQ, SU, IMO, energy weighting
WTI stays US$67–70
Neutral to mild negative for energy
WTI breaks below US$65
Negative for TSX energy; could offset materials strength
5. Early U.S. earnings season
The U.S. Q2 earnings season begins with companies such as Delta Air Lines and PepsiCo. This matters indirectly for the TSX because it affects North American risk appetite and consumer-demand assumptions. Reuters noted investors are watching early earnings for signs of consumer resilience and whether the rally can broaden beyond tech.
Data & Evidence
Date
Event / Data
Why it matters for TSX
Mon, July 6
U.S. final services PMI; ISM services
Affects U.S. growth expectations, yields, CAD/USD, cyclicals
Wed, July 8
U.S. wholesale inventories; FOMC minutes; consumer credit
Fed-rate expectations and credit conditions
Thu, July 9
U.S. existing home sales
Read-through to rates, consumer balance sheet, banks
Fri, July 10
Canada employment report; building permits
Direct impact on BoC expectations, banks, housing-linked equities
All week
Oil, gold, copper
Direct impact on TSX energy/materials weighting
Sources: Scotiabank economic calendar and Reuters market reports.
Valuation Logic
The TSX is close to record territory, so the market needs earnings or rate support to justify further upside. The short-term valuation logic is simple:
(8:30 a.m. ET) Canadian employment for June. The Street is projecting a flat reading (up 10,000 jobs) month-over-month with the unemployment rate remaining 6.6 per cent and average hourly wages growing 3.3 per cent from the same period a year ago.
(8:30 a.m. ET) Canadian building permits for May.
Also: U.S. Fed’s semi-annual Monetary Policy Report is released.
Earnings include: Delta Air Lines Inc.; Hyatt Hotels Corp.
