CAD: Carney projected to lead minority government - ING

Canadian media projects that the Liberal party has won the general election, and Mark Carney has been confirmed as prime minister. The results have, however, been much narrower than implied by polls. Liberals are currently projected at 167 parliament seats, short of the 172 majority. That would mean that, as in the previous legislature, they will need to bring the New Democratic Party (7 projected seats) into a coalition government, ING's FX analyst Francesco Pesole notes

USD/CAD remains below 1.390 and is primarily driven by US events

"As we had anticipated, the Canadian dollar is not liking the news of a minority Liberal win, as markets had likely priced a majority government as the baseline scenario. A thin parliament lead is hardly positive news for a country's currency, but CAD losses have been quite limited in size. USD/CAD remains below 1.390 and is still primarily driven by US events and the USD leg."

"In terms of longer-term implications, Carney has pledged to fight US President Donald Trump harshly on tariffs, and his closer ties with European countries could emerge as an obstacle in trade talks along the way. Ultimately, the crucial issue remains renegotiating the USMCA early. The Conservatives had more explicitly signalled their intention to do so. Carney might take his time, although his explicit intention remains to sit at the negotiating table and end the US-Canada tariff war."

"We retain a broadly flat USD/CAD view for now, as the correlation between the two currencies has re-strengthened and observed volatility has meaningfully lagged those of other USD crosses. We expect most trading into the summer to happen within the 1.37-1.40 range, and we target 1.39 for the end of the second quarter."