Oil and Gold Split on One Print
Oil and gold, the two commodity trades that Hormuz headlines feed inside the TSX, pulled apart on Wednesday because of one number: U.S. consumer prices rose 3.7% in September against 3.6% expected, with core prices up 0.3% on the month against 0.2% expected. The S&P/TSX composite closed at 35,584.46, down 399.52 points or 1.11%, which gave back all of the 319.36-point gain from Tuesday. XGD fell 4.2% to $52.83 while XEG finished at $30.55, up a cent.
The two moves trace to one cause. Invezz reported that the gasoline index rose 9.1% and the energy index 5.2% in the CPI, and TheStreet tied much of the increase to energy prices from the Iran war. WTI rose about 1% to US$95.07, a three-week high, as Houthi forces struck a Saudi Aramco building in Dhahran and a container ship hit a naval mine south of Hormuz. The same war lifted oil and the inflation reading, and the reading raised the odds of another Federal Reserve hike from about 22% to 42% (FXStreet), 46% (Bloomberg) or about 50% (CME FedWatch). December gold settled 1.26% lower at US$4,124.80.
Owning both is therefore one position, not two: a net bet on the chain from Hormuz oil to U.S. inflation to the Fed, with energy collecting the first link and gold paying for the last. The Market desk flagged gold names as the laggards of a narrow rally on Tuesday, with Wesdome Gold Mines down 9.01%. By the close, those laggards were the index story.
Since September 14, energy shares gained 5.1% and gold miners lost 9.8%, which left the composite 0.3% lower and shows the index netting two opposite responses to the same war.
XEG is the iShares S&P/TSX Capped Energy Index ETF and XGD the iShares S&P/TSX Global Gold Index ETF, all rebased to the September 14 close. The shaded band marks the September 28 to October 5 tanker attacks counted by Reuters.
The Hold Now Has to Survive a Fed Decision on the Same Day
The Bank of Canada hold that the Economy desk set as the base case now has to survive a Federal Reserve decision on the same day. The Bank of Canada announces on October 28 with the overnight rate at 2.25%, and FXStreet dates the FOMC meeting October 27 and 28, with the Fed target range at 3.75% to 4.00% after the 25 basis point hike on September 16. That is a gap of 150 to 175 basis points, and the currency has been absorbing it. USD/CAD stood at 1.4263 on the Bank of Canada daily rate, 2.3% above the 1.3947 recorded on the day of the Fed hike.
The U.S. dollar index reached its strongest level since the spring of 2025, according to FXStreet and Invezz. The hold rests on 110,000 lost jobs in two months and core measures expected between 1.8% and 2.5%, and none of that changed today.
The series has no observation for September 30 or October 12. The Federal Reserve raised its target range to 3.75% to 4.00% on September 16, and the dashed line marks the USD/CAD level that day.
The currency also changes what a U.S. equity loss means in Canadian dollars. The S&P 500 fell 1.11% to 7,718.94, which works out to about 0.8% for a holder of unhedged U.S. shares after the move in USD/CAD. The gap between the two central banks is showing up in the exchange rate, not in either policy rate, and both decisions land on October 28.
The VIX Answers to the Fed, and the Canadian Front End Has Not Answered at All
Across 23 sessions since September 14, the VIX has closed higher than it did today only on September 14, 15 and 16, the sessions around the Fed September meeting. The tanker campaign from September 28 to October 5 never took it past 16.39, and it fell 3.7% on the day Canada reported 68,300 lost jobs. Today the index rose about 10% from 15.27 to roughly 16.8, still inside the 14.21 to 17.71 range the Behavioural desk measured. That desk traced the earlier calm to falling hike odds. Those odds doubled, and the gauge moved with them.
The Canadian front end did not move at all. The 90-day Government of Canada Treasury bill yield was 2.38% on October 13, against 2.34% on September 16, a rise of 4 basis points over a span in which USD/CAD rose 2.3%. That bill sets the CRA rate: the Tax desk established that the Q1 2027 prescribed rate follows the October average and rounds up to the next whole percentage point, so a move from 3% to 4% needs an average above 3.00%, which is 62 basis points above the latest reading. The Fed shock repriced gold, the dollar and volatility. It has not touched the 3% family-loan window that closes on December 31.