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It’s a mess in Canadian politics at the moment.
Today the government is going to attempt to present the Fall Economic Statement. It was supposed to be delivered by finance minister Chrystia Freeland but she quit this morning, delivering an unusually harsh resignation letter, in part due to a dispute with Prime Minister Justin Trudeau on running larger deficits.
Parliament is ongoing at the moment but Trudeau isn’t there, nor is any representative of the finance department. Media is currently in a six-hour lock-up with the document, which will be delivered today by someone, which will detail the state of the country’s finances.
Trudeau’s reputation at home was already in shambles. He’s evidently in some kind of effort to court Mark Carney as finance minister; and for some reason the former BOC/BOE Governor is considering it, given that an election must be called by October and it’s hard to believe it lasts even that long.
Surprisingly, the junior coalition partner in the NDP continues to support the Liberals, though their leader called for Trudeau himself to step down. I can’t imagine their political fortunes improving if the Liberals select another leader, though there is a popular belief domestically that they only want to hang on so they qualify for their pensions in October.
As for Trudeau himself, the CBC reports that he’s not planning to quit, though CTV says Trudeau “conveyed to cabinet that he is considering prorogation or resignation” and might speak in Parliament later today. It could be a long night in Canada.
In any case, the Canadian dollar is taking it all in stride. I spoke with Reuters about the loonie earlier today and told them.
In many places in the world,
the resignation of the finance minister would be a crushing blow to the
currency but the market appears to have fully discounted a period of political
uncertainty, and inevitable change in government. The market might smile if
former Bank of Canada Governor Mark Carney joins cabinet but it won’t change
the trajectory.
The market is sanguine about
shifts in Canadian political power but is sleeping on the risks around the
economy. Housing starts numbers were stronger today but it’s a long pipeline
from sales that were made in the low-rate, rising-prices era and the front end
of that pipeline is dry. Interest rates still aren’t low enough to spark a
turn.
Finally, the strong US
services PMI on Monday underscored a Trump-bump for the US economy and US
dollar that’s still in the early stages.
I tend to think it’s all upside risks for the Canadian dollar here (downside for USD/CAD) because if an election is called, the outcome is a foregone conclusion and the market would like to see some change.
