One strategist says he sees potential upside for the loonie following Prime Minister Justin Trudeau’s resignation as the leader of the Liberal Party.
Trudeau announced his decision to step down Monday, declaring his intentions to stay on as prime minster while a new leader is chosen. According to Bloomberg News, the move prompted initial gains in the loonie, rising as much as 1.2 per cent Monday Morning. However, the gains did not continue, and the Canadian dollar was trading at around 70 cents U.S. late Tuesday morning.
“Until recently, we had a pretty downbeat view of both the Canadian economy and the Canadian dollar, despite the fact that your central bank was setting up to continue to reduce interest rates,” Thierry Wizman, a global FX and rates strategist at Macquarie, said in an interview with BNN Bloomberg Tuesday.
“The prospects for a consumer recovery in Canada in 2025 are quite poor, especially with the overhang of consumer debt and mortgage debt in the economy.”
He noted that a Conservative-led government in Canada could bring about structural changes on issues of deregulation and taxes while taking a pro-growth stance.
Wizman highlighted that the U.S. dollar rallied following the election of a Republican-led U.S. administration and said Canada’s currency could see a similar gains if a Conservative government is elected.
“On the presumption that the outlook, the structural outlook for growth in Canada will improve, that should be good for the loonie. To some extent the currencies are really just a reflection of the quality of policy administration in their respective countries,” he said.
Wizman said his group is in the process of re-evaluating its view on the Canadian dollar, depending on news regarding when a federal election will take place. He added that if an election takes place and a conservative government were to win the Canadian dollar could trade at around 77 cents U.S., instead of at around 68 cents U.S.
“We could go back down to the bottom of the of the recent trading range for the U.S. dollar versus the Canadian dollar,” he said.