Market News

The Canadian dollar held firm against the greenback after Mark Carney’s Liberal Party secured a narrow victory in a general election.

The loonie was at 1.3828 per U.S. dollar, while futures on the S&P/TSX 60 Index were a touch lower. Analysts flagged the tricky negotiations ahead and possibility for the currency to weaken.

Citigroup Inc. strategists last week said the loonie could fall as low as 1.45 per dollar if trade tensions with the U.S. re-escalated. MUFG sees longer-term economic risks from U.S. trade restrictions, which may require the Bank of Canada to continue cutting interest rates.

“A thin parliament lead is hardly positive news for a country’s currency,” said Francesco Pesole, FX strategist at ING. “Carney has pledged to fight U.S. President Donald Trump harshly on tariffs, and his closer ties with European countries could emerge as an obstacle in trade talks along the way.”

Canada’s currency has climbed about four per cent against the greenback so far this year as investors fled from U.S. assets, but the gains are smaller than many of its peers in the Group-of-10 have made.

Carney’s party had about 43 per cent of the national vote, but is likely to fall short of the 172 seats needed for a majority in the House of Commons, meaning the government will need to work with others to pass budgets and other legislation.

The former central banker, who touted himself as an experienced crisis manager during the five-week campaign, is tasked with helping the Canadian economy pivot to a new era that will likely be less dependent on the U.S., its biggest trading partner. He took over the job from Justin Trudeau in March.

“We are still wary of the risk that Canada’s economy could slow more sharply in response to trade disruption and policy uncertainty requiring the BoC to cut rates deeper so are not yet convinced that recent strong gains for the Canadian dollar are built on strong foundations,” MUFG FX strategist Lee Hardman wrote in a note.

Stocks take off

In equities, Canada’s S&P/TSX Composite Index has outperformed the S&P 500 Index for three straight quarters leading up to Monday’s election. It has a high concentration of gold mining stocks, and their strong gains have helped the index shine through tariff- and trade-induced market volatility.

Carney resigned all of his business positions, including as chair of Bloomberg Inc., earlier this year before seeking office.

With assistance from Ruth Carson, Tian Chen, David Finnerty and Anya Andrianova.

Jade Khatib, Geoffrey Morgan and Naomi Tajitsu, Bloomberg News