Date: 23 Oct 2019
The Canadian Dollar remained unfazed on the foreign exchange market on Tuesday, as Justin Trudeau secured a second-term election victory, with a minority Canadian government. The USD/CAD pair held onto its recent trading gains, as a slim victory by Trudeau was already predicted in the election polls.
A minority government came to pass, as the ruling Liberal party failed to secure the 170 seats needed to form a majority Canadian government. Justin Trudeau is now set for his second term as Prime Minister of Canada, although he will have to secure backing from other parties in order to pass any new legislation.
Yesterday’s election result is unlikely to pose any problems to the economy of Canada, as Canadian Parliament is known for pragmatism and finding consensus, as opposed to the gridlock on Washington D.C. The current prospects for the Canadian economy also remain solid, despite the ongoing global slowdown.
The recent rise in oil prices, coupled with the re-opening of major oil fields in Canada has helped to stave off the economic downturn. U.S President Donald Trump was quick to congratulate PM Justin Trudeau on his election victory. Both countries continue to enjoy a strong trading relationship after tense negotiations over NAFTA.
Going forward, the Canadian Dollar is likely to be increasingly driven by oil prices and the Bank of Canada’s interest rate path. The Bank of Canada has recently kept rates on hold, after a series of hawkish rate hikes earlier this year. Yesterday, Canadian monthly retail sales data came in much worse than expected, pushing back expectations of a rate hike from the Bank of Canada this month.
USD/CAD Daily Candlestick Chart | Source: ActivTrader
The U.S Dollar has undergone a sizeable reversal against the Canadian Dollar, leaving the pair fairly overstretched to the downside. Traders looking to enter into the USD/CAD short trade from a more favorable position may be waiting for a technical correction back towards the 1.3260 to 1.3300 area.
Written by Nathan Batchelor, External Analyst, ActivTrades
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