04:24 PM EDT, 06/24/2025 (MT Newswires) -- The Toronto Stock Exchange rose to a fresh record high on Tuesday as markets priced out further any Iranian retaliation against the United States, while signs of moderation in Canada's inflation has led to a debate about whether this will be enough to put this country's central bank back on the rate cut path.

Despite lower commodity prices, the resources-heavy S&P/TSX Composite Index ended the session up 109.26 points to 26,718.62, leaving it more than 100 points above the prior record close set on June 12. Most sectors were higher, led by Info Tech, up 2.5%, and the Battery Metals Index, up near 1.2%,. But Energy was down near 1.5% and Health Care was flat to slightly lower

Rosenberg Research in a note entitled 'Geopolitics in Focus: Markets Are Pricing Out Further Iranian Retaliation' noted the U.S. air strikes against Iran were met with a calm reaction from global markets, with oil prices falling significantly on Monday despite Iranian threats to close the Strait of Hormuz. The research said "markets are now fully pricing in a de-escalatory scenario, but some tail risks remain". With the well-telegraphed strike on a U.S. base in Qatar, and a possible ceasefire, Iran appears to be done with their reactions, it added.

In a separate note, Rosenberg Research said today's report showing May inflation unchanged at 1.7% was "mixed", but added there was "just enough comforting news" to ensure the Bank of Canada pause last month will not mean an end to the easing cycle. "All in," said founder David Rosenberg, "a mixed report and something for everyone."

"From my lens," he added, "what is most important is that the ex-mortgage inflation rate is running below target. Not to mention that inflation is a classic lagging indicator, and with the Canadian economy now flatlining, the output gap is widening again, and the buildup of excess supply will ensure that the disinflation momentum will be renewed in coming months and quarters. How the tariff file plays out obviously is important, but when the economy builds up slack the business sector feels the brunt via profit margin compression. Inflation is not all about what the corporate sector wants to charge but what it can get away with charging, and when the unemployment rate trends higher, as is already the case, this ability to pass on any costs becomes seriously constrained by a consumer who will simply revolt by cutting back or delaying their spending activity."

Elsewhere, David Doyle, head of economics at Macquarie Group, noted Canada's underlying inflation measures moderated in May, with trim/median averaging up 0.21% month over month and 3.0% year over year, "a result that should give the Bank of Canada some comfort following the firm figures for April". Doyle noted headline CPI remained at 1.7% annualized, with the energy price decline due to cancellation of the consumer carbon tax continuing to provide relief.

Macquarie expects an "uneven moderation" in underlying inflation ahead. Doyle noted unemployment has reached 7% and private sector wage growth has "moderated sharply", while shelter inflation is likely to continue to subside with low population growth a driver. The recent rebound in the Canadian dollar should also help alleviate pressure on import prices, he noted.

Doyle said today's data kept the market odds of a July 25 basis point cut at near 33%. Macquarie continues to see a rate cut as likely to occur in next month, although the decision will hinge on the outcome of the inflation data for June, due on July 15, and the Business Outlook Survey coming July 21. "We suspect the latter will show a moderation in inflation expectations. This has already shown up in small business wage and price plans in recent months," he added.

However, Derek Holt, Head of Capital Markets Economics at Scotiabank, said core inflation remains "too warm" to be contemplating rate cuts. Holt said: "Ignore the headline CPI reading that continues to be weighed down by the elimination of the consumer portion of the carbon tax; it's below the 2% target, but the tax distortion makes that meaningless. The bigger issue here is that underlying price pressures remain too high and rising breadth combines to signal that inflation has yet to be licked. To twist a phrase, the Bank of Canada shouldn't even be thinking about thinking about when to cut rates. Let's see prospects for a trade and security deal, a Fall budget, and further data first."

All of this comes as S&P Global Ratings Economics said today in a report titled 'Economic Outlook Canada Q3 2025: U.S. Tariff Uncertainty And Slower Population Growth Weigh On Momentum' that it believes Canada's economy is still set to slip into below-potential GDP growth in the near term, while avoiding a recession.

Of commodities, West Texas Intermediate crude oil fell for a second day on Tuesday as it cedes a risk premium after the U.S. and Iran backed away from hostilities while Iran and Israel reached a shaky ceasefire agreement. WTI oil closed down $4.14 to settle at US$64.37 per barrel, bringing losses over the past two sessions to US$10.56. August Brent crude was last seen down $4.19 to US$67.29.

Also, gold prices tumbled with safe-haven demand easing. Gold for August delivery was last seen down US$60.00 to US$3,335.00 per ounce.