TSX Composite: Resilient Near Record Highs
It was a steady week for the S&P/TSX Composite, with the index trading just above the 34,500 level heading into Friday's close — not far from its 52-week high of 34,846. The market found support from several directions: optimism around a potential US–Iran ceasefire extension, strong performances in technology, mining, and industrial names, and falling bond yields following weaker-than-expected economic data.
On the sector level, tech and metal mining led gains, while energy producers were mixed after oil prices pulled back from recent highs. Among the big banks, RBC, TD, and BMO each climbed roughly 1% on the week, helped by lower inflation concerns easing pressure on borrowing costs. Gold miners also had a solid run — Agnico Eagle added over 0.5% and Franco-Nevada advanced close to 1%.
Year-to-date, the TSX is up approximately +9.3%, placing it third among major global indexes, behind Japan's Nikkei 225 (+29.1%) and the US S&P 500 (+9.8%).
Canadian Economy: Technical Recession Confirmed
The big domestic story this week came from Statistics Canada: Canadian GDP stalled in Q1 2026, marking a second consecutive quarterly contraction after a 0.6% decline in Q4 2025. That meets most economists' definition of a technical recession — though opinions on the severity varied.
Several factors dragged on growth: higher gold imports reduced net activity, resale housing remained weak, exports were mildly negative, and business capital investment fell for a fifth straight quarter — largely attributed to ongoing uncertainty around US tariffs.
The Bank of Canada, which has held its benchmark rate steady at 2.25% through its last four meetings, will be watching the data closely ahead of its next rate decision on June 10. The GDP miss adds pressure for a dovish stance, with markets expecting the BoC to hold or potentially cut as it weighs weak growth against oil-driven inflation risks.
Oil: Retreat on Ceasefire Hopes
Crude oil prices pulled back this week as US–Iran ceasefire extension talks gained traction. WTI front-month futures hovered around $87–$88 USD/barrel by Friday — down from recent highs — after reports that the two countries had tentatively agreed to extend their ceasefire and reopen shipping through the Strait of Hormuz, pending final approval from President Trump.
The retreat in oil helped ease energy-driven inflation concerns, which in turn pushed bond yields lower and gave interest-rate-sensitive sectors like banks a lift. For Canadian producers and energy-heavy provinces like Alberta, however, the pullback tempers some of the windfall from what has been one of the largest crude price surges since WTI futures began trading.
The Bank of Canada's April outlook had assumed Brent oil at roughly US$90/barrel for Q2 2026, gradually declining to US$75 by mid-2027. This week's move is broadly in line with that trajectory.
Canadian Dollar: Under Pressure
The loonie had a difficult week. USD/CAD was trading in the 1.38 range — a reflection of multiple headwinds hitting the Canadian dollar simultaneously: softer oil prices reducing commodity-linked support, the GDP miss reinforcing a dovish BoC outlook, and continued strength in the US dollar on resilient American economic data.
National Bank of Canada economists had flagged earlier in May that USD/CAD appeared to be converging toward 1.35 — a level last seen in 2024 — buoyed by oil revenues boosting Canada's trade balance. But this week's news pushed that scenario further out. Most Canadian bank forecasts continue to project a gradual CAD recovery toward the low 1.30s by late 2026, assuming rate differentials narrow as the Fed eventually eases.
Gold: Holding Strong
Gold remained a bright spot, with spot prices near $4,550–$4,580 USD/oz as of Friday — supported by safe-haven demand, geopolitical uncertainty, and ongoing concerns about US dollar debasement. CIBC, which set a bold $6,000 gold target for 2026 earlier this year, has cited the same drivers: geopolitical risk, a weaker USD trend, and what analysts describe as a broader "fiat currency debasement trade."
Canadian gold miners continued to benefit, with Agnico Eagle and Franco-Nevada posting gains on the week.
What to Watch Next Week
- Bank of Canada Rate Decision — June 10: With GDP now confirming a technical recession and oil prices retreating, pressure is building on the BoC to signal a cut.
- 🇺🇸 US Jobs Report: A key data point for the Fed's policy path — and by extension, the CAD/USD outlook.
- US–Iran Ceasefire: Trump's approval (or rejection) of the extended deal will be the biggest wildcard for oil prices heading into June.
- Canadian Inflation Data: Watch for any CPI read that could complicate the BoC's June decision.
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