Canadian dollar gains as Wall Street weighs in on Justin Trudeau’s resignation

The Canadian dollar advanced after Canadian Prime Minister Justin Trudeau announced his resignation as head of the Liberal Party, triggering a contest to replace him as leader.

The so-called loonie rose as much as 1.2% to C$1.4280 Monday morning, aided by a weaker US currency. Those gains softened later in the session as Trudeau addressed the media during a speech in Ottawa.

The Canadian dollar in December slid to its lowest level since March 2020 as Trudeau’s government fell into crisis after the shocking resignation of his finance minister. The loonie lost about 6% in value in the last three months of 2024, dragged down by tariff threats from President-elect Donald Trump.

Here’s what investors and strategists are saying:

Valentin Marinov, head of G-10 FX strategy at Credit Agricole

“I doubt that Trudeau’s departure would be a game changer for the CAD even if it ultimately ushers in a period of relative political calm. This is partly because of the weak economic backdrop in Canada that has forced the BOC to become one of the most dovish G10 central banks in recent months.”

“While the ongoing political drama in Ottawa could trigger some interesting intraday moves in the CAD, the loonie may not yet be ready to spread its wings and fly.”

Thierry Wizman, global currencies and interest-rate strategist at Macquarie

“The bottom line is that with Trudeau’s pending resignation, it looks like a Conservative-led government is closer to being on the way in Canada, and we can now say with greater than 50% certitude that the Conservatives or a Conservative-led coalition will govern Canada in 2025. That realization should help the CAD stand up.”

Jayati Bharadwaj, currency strategist at TD Securities

“I don’t think the political uncertainty will resolve today. In fact, the more this uncertainty drags the less scope there is for any meaningful imminent fiscal package in Canada.”

“Don’t think there is much to turn bullish the Canadian dollar from Trudeau stepping down.”

Sarah Ying, head of FX strategy at CIBC Capital Markets

“Currency moves off Canadian politics are historically rare. We suspect moving forward, most of the near-term moves in the Canadian currency would be driven by Trump headline risk, as we also saw this morning.”

Karl Schamotta, chief market strategist at Corpay

“We think markets will ultimately welcome a win by Pierre Polievre’s Conservative Party—which has a massive lead in the polls—but considerable uncertainty remains around the degree to which his right-of-center political stance will align with Trump’s and make tariffs less likely.”

Kyle Chapman, FX markets analyst at Ballinger Group

“A new government could be good for the Canadian dollar, and Trudeau is speeding up the process. It sets the stage for a no confidence vote and an earlier election, where the polls hint heavily towards the Conservative’s Poilievre becoming PM.”

“A conservative, Trump-aligned leader in Canada could also mean that the US administration becomes more amenable to going easy on trade tariffs.”

Bipan Rai, head of ETF strategy at BMO Asset Management

“We suspect that the immediate impact of Trudeau’s resignation and prorogation of parliament aren’t the primary catalysts. Instead, the far more important factor continues to be potential tariffs and whether there will be any carve-outs for Canada.”