Today the government is going to attempt to present the Fall Economic Statement. It was supposed to be delivered by finance minister Chrystia Freeland but she quit this morning, delivering an unusually harsh resignation letter, in part due to a dispute with Prime Minister Justin Trudeau on running larger deficits.
Trudeau's reputation at home was already in shambles. He's evidently in some kind of effort to court Mark Carney as finance minister; and for some reason the former BOC/BOE Governor is considering it, given that an election must be called by October and it's hard to believe it lasts even that long.
As for Trudeau himself, the CBC reports that he's not planning to quit, though CTV says Trudeau "conveyed to cabinet that he is considering prorogation or resignation" and might speak in Parliament later today. It could be a long night in Canada.
In any case, the Canadian dollar is taking it all in stride. I spoke with Reuters about the loonie earlier today and told them.
In many places in the world, the resignation of the finance minister would be a crushing blow to the currency but the market appears to have fully discounted a period of political uncertainty, and inevitable change in government. The market might smile if former Bank of Canada Governor Mark Carney joins cabinet but it won’t change the trajectory.The market is sanguine about shifts in Canadian political power but is sleeping on the risks around the economy. Housing starts numbers were stronger today but it’s a long pipeline from sales that were made in the low-rate, rising-prices era and the front end of that pipeline is dry. Interest rates still aren’t low enough to spark a turn.Finally, the strong US services PMI on Monday underscored a Trump-bump for the US economy and US dollar that’s still in the early stages.I tend to think it's all upside risks for the Canadian dollar here because if an election is called, the outcome is a foregone conclusion.
This article was written by Adam Button at www.forexlive.com. Read More Details
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