04:31 PM EDT, 07/21/2025 (MT Newswires) -- The Toronto Stock Exchange returned to winning ways Monday, but only just in the end after hitting record intraday highs and looking like it would re-test last Thursday's record close earlier in the session as rate cut expectations rebuild in Canada.

The S&P/TSX Composite Index closed up a modest 2.99 points to 27,317.0, having been near 27,446 shortly before midday, briefly giving it a chance of beating the record close of 27,386.93 hit last week. Among sectors, most were lower, with Energy the biggest loser, down near 1%. No sector gained near 1%.

Of commodities today, West Texas Intermediate crude oil closed with a small loss, remaining rangebound as strong summer demand counterbalanced rising supply and growth worries. WTI oil for August delivery closed down $0.14 to settle at US$67.20 per barrel, while September Brent crude was last seen down $0.11 to US$69.17.

But gold futures were sharply higher Monday, rising to the highest in a month as the dollar and treasury yields weakened. Gold for August delivery was last seen up $49.50 to US$3,407.80 per ounce, the highest since June 18.

The Bank of Canada released both the Business Outlook Survey and the Canadian Survey of Consumer Expectations for the second quarter of 2025 revived talk around the outlook for interest rates. Katherine Judge, Senior Economist at CIBC Capital Markets, said the bank's Q2 surveys for businesses and households showed that trade uncertainty is still weighing on activity, with sentiment still low despite an improvement from the Q1 survey. Judge noted firms reported they are not able to pass on a lot of the cost increases tied to tariffs to consumers due to weak demand, and near-term inflation expectations moved lower for businesses. This suggests that slack may not be widening, but is persisting, and with inflation expectations well anchored, the BoC should feel comfortable cutting in September, she added.

Meanwhile, Judge also noted, the Canadian survey of consumer expectations showed that job concerns remained elevated in trade exposed sectors, but that worries had diminished from Q1. Households are reducing spending and increasing savings as a result of the uncertainty, she said.

Royce Mendes, Head of Macro Strategy at Desjardins Capital, noted worries about tariff pass through and inflation expectations were the reasons the BoC held rates back in June. But he said those reasons look less concerning in these surveys. "While central bankers probably won't ease monetary policy next week, there is ample scope for them to resume their cutting cycle later in the year should the economy continue to stagnate. Yields in Canada are largely unchanged as this survey is unlikely to move the needle for next week's rate decision. However, we do expect the central bank to take a dovish tone in its communications, which could see rate cut expectations rebuild," Mendes added.

According to National Bank Financial economists Taylor Schleich and Ethan Currie, when it comes to next week's BoC meeting, the decision has arguably already been made. The duo see the central bank holding steady in light of core inflation pressures, and risks. They noted June's reported labor market "strength" also doesn't scream for immediate rate relief. "Saying that, we're not embracing the growing view that this easing cycle is over and overall, this BOS [Business Outlook Survey] supports that. These data suggest that the economy will continue to operate below its potential (at least over coming months) and leaves us even more skeptical of June's hiring surge. Ultimately, inflation will be in the driver's seat but continued and/or growing economic slack is not consistent with persistently above target inflation, even with some tariff effects. Despite OIS market skepticism, the Bank could be off the sidelines sooner than expected."

Still, in looking ahead, Claire Fan, Senior Economist at RBC, maintains the BoC faces an "unusually high hurdle" for considering additional rate cuts. Fan noted the central bank must, given the brewing trade war with the United States, account for increased government support. This, Fan said, is better suited to address concentrated weakness in trade exposed sectors than the blunt tool of lower interest rates. RBC's base case forecast continues to project the BoC will maintain the overnight rate at current levels going forward.