Canadian Dollar Trades Near Three-Month High as Markets Await Trudeau’s Victory
Arslan Butt • 1 min read
The Canadian dollar is trading above a three-month high against the US dollar following the general elections as markets hope for the Liberal government to come back to power. At the time of writing, USD/CAD is trading around 1.308.
A closely contested election drew to a close on Monday and the results are due to be announced later today. According to latest data from Elections Canada, the incumbent Canadian PM Justin Trudeau’s party of Liberals is anticipated to form a minority government. The party has either won or is said to be in the lead in 155/338 seats.
Although forming a minority government would weaken Trudeau’s position and possibly make it harder for his new government to pass key legislation, it is still an optimistic outcome as far as the Canadian economy is concerned. However, if Trudeau’s party takes the support of the New Democrats (NDP), it could exert some downward pressure on the CAD which would otherwise have traded strong as the risk appetite improves in financial markets. NDP is keen to increase corporate tax rates and impose a wealth tax, a move that markets will not be too pleased about.
The improvement in the trade war sentiment over updates from Trump assuring markets of a partial trade deal within a month helped boost the Canadian dollar to trade at a three-month high of 1.3071 in Monday’s session. A re-election of Trudeau points at more aggressive fiscal spending, boosting the appeal of the Canadian dollar in forex markets.