Key Focus This Week:  “Mixed Economic Signals and Policy Uncertainty Drive Caution”

North American equity markets experienced continued volatility during the week, as investors navigated a complex macro environment shaped by economic data releases, evolving monetary policy expectations, and persistent geopolitical uncertainty. Overall, market sentiment remained cautious, with major indices showing mixed but generally subdued performance.

The March nonfarm payrolls report came in stronger than expected, with job gains of 178,000, exceeding market expectations. However, underlying details were more mixed, as wage growth softened, with average hourly earnings rising just 0.2% month-over-month and 3.5% year-over-year—the slowest pace since 2021. This suggests that while labor demand remains resilient, underlying inflationary pressures from wages may be easing.

Monetary policy continued to be a central driver of market sentiment. Federal Reserve Chair Jerome Powell reiterated that the policy outlook remains data-dependent and that the Fed is not in a position to adjust rates immediately. As reported by Reuters and MarketWatch, Powell emphasized that policymakers are in a “wait-and-see” mode, with inflation expectations remaining well anchored. This reinforced the market’s view that rate cuts are unlikely in the near term.

In Canada, economic data pointed to modest but fragile growth. The January GDP release showed the economy expanded by approximately 0.1% month-over-month, indicating limited momentum at the start of the year, according to Statistics Canada and reporting from Reuters. At the same time, recent communication from the Bank of Canada highlighted concerns around structural headwinds, including weak business investment and slower productivity growth. These factors continue to weigh on the medium-term outlook and limit upside for Canadian equities.

In the foreign exchange market, the U.S. dollar remained firm, with the USD/CAD pair trending higher amid relatively weaker Canadian economic data. Meanwhile, gold prices were supported by safe-haven demand during periods of market uncertainty, while oil prices remained elevated due to ongoing geopolitical tensions, continuing to influence inflation expectations.

Overall, the week highlighted a market environment increasingly driven by macroeconomic data and policy uncertainty. Investors remain focused on incoming economic indicators—particularly labor market and inflation data—to assess the trajectory of growth and the timing of potential central bank policy adjustments.

Last Week’s Key Economic Data & News Recap

Geopolitical Developments Around Iran Trigger Market Swings

Geopolitical tensions involving Iran and the United States intensified during the week, driving volatility across global markets. Early in the week, reports of potential U.S. military action targeting Iranian energy infrastructure raised concerns about supply disruptions, contributing to a sharp rise in oil prices and a shift toward risk-off sentiment. However, markets later rebounded after headlines indicated a delay in escalation, easing immediate concerns over supply shocks. This sequence of events led to notable intraday swings in both energy markets and global equities, underscoring the sensitivity of investor sentiment to geopolitical developments.

Canadian Economy Expands Modestly