Any Trudeau effect on Canadian dollar wears off as reality sets in
The impact of Justin Trudeau’s resignation on the Canadian dollar appears to be fading, as domestic politics take a backseat to systemic headwinds, including those caused by Trump tariffs and the expectation of more Bank of Canada rate cuts.
On Monday, the Canadian dollar rose 0.79 per cent from its Friday close, at one point popping above the 70-cent-U.S. mark from which it had dropped on Dec. 16 — the day Chrystia Freeland announced her resignation as finance minister.
Tuesday, the Canadian dollar was down slightly at 69.7 cent U.S., as currency experts and economists weigh the broader issues that will whipsaw the currency.
“It may be tempting to ascribe this (the loonie’s rise on Monday) to Prime Minister Justin Trudeau’s decision to step down yesterday,” Karl Schamotta, chief market strategist at Corpay Currency Research, said in a note.
But Schamotta said that the loonie’s performance on Monday compared with other major currencies suggests otherwise.
Gains yesterday by the Canadian dollar left it stuck in the middle of a pack of other currencies, including the Mexican peso, the Australian dollar, the pound and the euro.
That tells Schamotta, “traders don’t see short-term domestic political developments changing the longer-term economic calculus that has kept the exchange rate under pressure.”
Trudeau wasn’t the only news the currency had to contend with.
Mixed in with the prime minister’s announcement was a Washington Post story quoting advisors close to Trump who said that any United States tariffs were more likely to be implemented on a targeted basis, rather than across the board, and gradually.
That story came out around 7 a.m. EST. A few hours later, Trump rebutted the Post piece on his Truth Social platform.
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