Trudeau’s resignation may trigger a CAD rally in 2025 – London Business News | Londonlovesbusiness.com

After nearly 10 years in power, Canadian PM Justin Trudeau is reported to resign as leader of the Liberal Party, taking Canada one step closer to a Conservative election win that could fuel strength in the Canadian dollar.

With this news, the loonie has strengthened by over 0.8% against the dollar today, outperforming most of its peers.

There is a list of factors that have led up to his crashing approval and to his resignation: the curse of incumbency and the post-covid inflationary spike that helped to take down governments in the US, the UK, France, and many others; worsening housing shortages; stagnant per capita GDP; a turn in immigration attitudes; and the internal friction generated by the challenges of an incoming US president that is threatening blanket 25% tariffs.

Per capita economic output has barely budged in the time that Trudeau has been PM, and recent economic weakness is a critical reason behind the Bank of Canada’s standout dovishness over the last year.

A new government could be good for CAD, 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.

Poilievre shares many of Trump’s hallmarks, including a dislike of deficit spending and a desire for deregulation and tax cuts, and he has expressed a strong preference for a hawkish monetary policy stance and a strong Canadian dollar.

He has gone so far as to say that he would fire Governor Macklem and install a more hawkish ally. A conservative, Trump-aligned leader in Canada could also mean that the US administration becomes more amenable to going easy on trade tariffs.