CAD: Trudeau’s test After sliding 10ppt following PM Justin Trudeau calling a snap election, the Liberal Party’s approval rating has bounced to 32.5% and is back above that of the main opposition Conservative Party. The margin is only 2ppt, however, making Monday’s election a tight race, especially given the tendency of the polls to underestimate support for both the Liberal and Conservative Parties in favour of the minor parties. The most likely outcome for the election is a return of Trudeau as PM of a minority government with the Liberals again forming a coalition with the left-leaning NDP, which is a more natural ally to the Liberals than the Conservatives. A surprise victory by the Conservatives could be a modest positive for the CAD: (1) the Conservatives have outspent the Liberals according to pundits’ estimates, but have also pledged a return to balanced budget within 10 years (a potentially contradictory claim) unless spending is front loaded; and (2) the Conservatives are less aggressive on carbon reduction targets than the Liberals, which would be a positive for Canada’s large energy sector. With close to status quo the likely election outcome, the CAD is likely to remain highly sensitive to rates and market rather than political risk.
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