Table of Contents

Market Context
What Happened
Why It Matters
Sector Breakdown
Risks to Watch
What to Watch Next
Final Outlook

Market Context

The S&P/TSX Composite has spent this week absorbing one of its more eventful stretches of the summer, moving from Monday’s modest pullback tied to an oil price shock to Tuesday’s rebound on cooler-than-expected U.S. inflation data. With the index sitting within close range of its 52-week high of 35,629.89, today’s Bank of Canada decision arrives at a genuinely consequential moment for whether that momentum continues.

What Happened

The TSX Composite closed Monday at 35,252.72, down 0.15%, as oil prices surged more than 9% on the Strait of Hormuz blockade announcement, with energy sector strength only partially offsetting weakness in materials, financials, and consumer discretionary names. The index rebounded Tuesday, climbing roughly 90 points to trade near 35,340, as base metals and financials strengthened following the release of June’s Consumer Price Index data, which showed U.S. inflation falling 0.4% on the month and easing to 3.5% year-over-year, well below the 3.8% consensus forecast. Core inflation also surprised to the downside, falling to 2.6% year-over-year from 2.9% in May. The same day, Trump abandoned his proposed 20% toll on Hormuz shipping during Fed Chair Warsh’s testimony, while U.S. bank earnings began rolling in, with Bank of America beating expectations on both earnings and revenue, even as IBM’s shares plunged roughly 22% to 25% on disappointing preliminary results, weighing on the Dow.

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Why It Matters

This week has demonstrated the TSX’s particular sensitivity to the oil-inflation-rates chain reaction currently dominating global markets. The index’s ability to rebound Tuesday, even as the underlying geopolitical situation remained fluid, suggests investors are increasingly parsing individual data points rather than reacting uniformly to every headline.

Today’s Bank of Canada decision is the week’s most significant remaining catalyst. With the central bank widely expected to hold its rate at 2.25%, market attention is likely to focus heavily on the accompanying Monetary Policy Report and Governor Macklem’s press conference for signals about the path forward.

Sector Breakdown

Energy remained a consistent source of strength through both Monday’s pullback and Tuesday’s rebound, with producers benefiting directly from this week’s oil price volatility. Financials showed the clearest divergence between sessions, declining Monday before recovering Tuesday as cooler inflation data eased rate-hike concerns. Materials told a more mixed story, with base metals strengthening Tuesday even as precious metals names continued to face pressure from falling gold prices tied to hawkish rate expectations.

Risks to Watch

The most immediate risk remains further volatility in the Strait of Hormuz situation, which has already shown its capacity to move the index sharply within a single session. A surprise from today’s Bank of Canada decision, whether in the rate itself or in the tone of the Monetary Policy Report, could meaningfully shift sentiment given how closely markets have been tracking rate expectations this week. Continued U.S. bank earnings and any additional disappointments along the lines of IBM’s preliminary results could also weigh on broader sentiment.

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What to Watch Next

Investors should watch today’s Bank of Canada decision and Monetary Policy Report, due at 9:45 a.m. Eastern, along with Governor Macklem’s press conference shortly after. Fed Chair Warsh’s second day of testimony, before the Senate Banking Committee today, will also be closely watched. Wednesday’s U.S. producer price index rounds out today’s dense data calendar.

Final Outlook

The TSX’s ability to claw back Monday’s losses on the strength of cooler inflation data suggests the underlying uptrend remains intact, even amid a genuinely volatile week. Today’s Bank of Canada decision will be an important test of whether that momentum can continue into the back half of the week.