Canadian Prime Minister Justin Trudeau held onto to power but lost his majority. Brexit is still not a done deal, reports Adam Button.
Canadian Prime Minister Justin Trudeau held onto power Monday, but his party was diminished to a minority, raising fresh questions at a later time, but for now the loonie remains at three-month highs.
Later in the day, Canadian dollar (CAD) traders turn their focus to the Bank of Canada’s business survey. The British pound (GBP) dropped by a full cent on reports the government threatened to pull the Brexit withdrawal and call for elections an election by year-end if parliament votes again for delay and the EU offers to delay Brexit until Jan. 31.
U.S. existing home sales for September are due next, expectation is for a drop of 0.7% from +1.3%.
Canada's governing Liberals will fall about a dozen seats short of the majority they previously held but fared better than many were expecting. Trudeau will now try to govern with a minority and he's likely to cobble together a coalition from issue to issue, rather than trying to form a formal coalition. This also means none of the opposition parties will have any appetite to bring down the government and trigger another election. Trudeau is safe for at least 12 months and has a good chance of finishing the four-year term barring any major scandal or drop in the economy.
The market reaction so far has shown that Canada is one of the dwindling number of countries where politics remains a small part of the trading landscape. There are true differences in the parties, but nothing so meaningful that it will scare away or attract capital to Canada.
One exception is oil and gas. The market will be watching closely for signs on how a minority government will manage the resources sector, and how energy companies will react to the results. In the short term there are some downside risks for the Canadian dollar but the rule of thumb on every election is to buy the dip, and that will prove true again.
Downing Street Threatens Elections
GBP traders were fixated on parliament as it holds a first vote on the Brexit bill Tuesday. Barring any fresh last-minute amendments or changes, the vote will take place at 1800 GMT (19:00 London) and it's likely to set off a large move in the pound. The latest indications show that Prime Minister Boris Johnson may have a majority by fewer than five votes, but some members of Parliament want to slow down the process and could balk, at least for now.
Adam Button is co-owner and managing director of ForexLive.com and a contributor at AshrafLaidi.com. You can see Ashraf’s daily analysis at www.AshrafLaidi.com and sign up for the Premium Insights. Ashraf's Tweet on indices here.
