Last week’s release of the Federal Reserve’s June FOMC Meeting Minutes showed unanimous support among policymakers for keeping interest rates unchanged at the June meeting. Officials generally agreed that the U.S. economy continues to expand at a solid pace, labour market conditions remain broadly healthy, while inflation remains well above the Federal Reserve’s long-term target and upside risks to price stability persist.

The minutes also revealed ongoing differences regarding the degree of policy restrictiveness and the future path of interest rates. A small number of participants suggested that rising inflation pressures could eventually justify additional policy tightening, while others argued that current interest rates have yet to become meaningfully restrictive. Higher energy costs, tariffs, supply chain disruptions and continued AI-related investment demand were all identified as factors that could sustain inflationary pressures.

Overall, the minutes reinforced expectations that the Federal Reserve will maintain a cautious policy stance in the near term. Market attention has gradually shifted from the timing of future rate cuts toward whether persistent inflation could ultimately require interest rates to remain elevated for longer—or even prompt renewed policy tightening.

Canadian Business Confidence Softens While Labour Market Remains Resilient

The Bank of Canada’s Business Outlook Survey for the second quarter indicated that business sentiment weakened after improving over the previous three consecutive quarters. Sales expectations moderated, hiring intentions fell below historical averages, and an increasing number of businesses cited elevated fuel costs and geopolitical uncertainty in the Middle East as factors weighing on domestic demand.

Business pricing expectations continued to diverge from overall operating conditions. Higher energy and input costs have pushed inflation expectations higher, while businesses outside Canada’s Prairie provinces generally expressed more cautious views toward future sales and operating activity. In contrast, firms associated with the energy and natural resource sectors remained relatively optimistic regarding investment, sales and hiring plans.

The Bank of Canada’s Canadian Survey of Consumer Expectations also showed that short-term household inflation expectations remain elevated. Trade tensions, energy prices and fuel costs have become increasingly important concerns, while higher living costs and economic uncertainty continue to restrain household spending plans. Nevertheless, consumers reported a modest improvement in labour market conditions and somewhat lower concerns regarding unemployment.

Canada’s labour market remained broadly stable in June. Overall employment changed little, while the unemployment rate declined for a second consecutive month. Employment gains among youth and core working-age workers were partially offset by weaker employment among older workers. Accommodation and food services recorded employment growth, while manufacturing employment declined. Overall, the data suggest that Canada’s labour market continues to stabilize, although meaningful differences remain across industries and demographic groups.

Technology Leadership Continues to Support U.S. Equity Markets

Major U.S. equity indices continued to advance last week despite increasing sector divergence. The S&P 500 gained 1.2%, the Nasdaq Composite advanced 1.7%, while the Dow Jones Industrial Average declined 0.5%. Strong performance in technology and consumer discretionary stocks helped push the S&P 500 closer to its record highs.

Artificial intelligence and semiconductor companies remained the primary drivers of market performance. The strong U.S. market debut of SK Hynix further strengthened investor optimism surrounding memory chips and AI infrastructure demand. However, as valuations continue to expand, investors are becoming increasingly focused on whether corporate earnings can justify current market expectations, leaving semiconductor stocks vulnerable to elevated volatility.

With second-quarter earnings season now underway, investor attention is gradually shifting away from macroeconomic policy and AI-related narratives toward actual corporate earnings, forward guidance and consumer fundamentals. Earnings from the major U.S. banks are expected to provide the first meaningful assessment of economic activity, loan demand and credit quality.

Middle East Tensions Lift Oil Prices While Gold Faces Pressure from Higher Rate Expectations

Renewed military conflict between the United States and Iran, slower shipping activity through the Strait of Hormuz and growing concerns over global crude oil supplies pushed oil prices higher last week. Although markets continue to anticipate potential de-escalation and renewed diplomatic negotiations, Brent crude gained approximately 5.5%, while WTI crude rose nearly 4% during the week.

The rebound in energy prices revived concerns regarding inflation and production costs. Higher oil prices could increase transportation and manufacturing expenses while reducing central banks’ flexibility to ease monetary policy, becoming an important driver of both bond and precious metals markets last week.

Gold, however, failed to fully benefit from increased geopolitical uncertainty. Spot gold declined approximately 1.7%over the week as rising oil prices reinforced expectations for persistent inflation and tighter monetary policy. Higher interest rate expectations increased the opportunity cost of holding non-yielding assets such as gold, offsetting part of the safe-haven demand.