Trudeau Holds On, Gold Steadies
Trudeau will remain Prime Minister with a third term but won't have a strengthened mandate. Still, he will have some latitude to reshape the post-pandemic era. Any major pushes towards tax or capital gains reforms remain opaque, but the left-wing NDP said taxing the wealthy more heavily is their top priority if Liberals want their support.
Overall, it will go down as a needless election where Trudeau spent hard-won political capital gained in the vaccine rollout and NAFTA negotiations while getting nothing in return.
History has shown Canadian elections are hardly a factor for the loonie and this was no different as it's outperformed AUD and NZD by 30 pips in the aftermath; most of which is likely due to a bounce in oil prices.
The broader scenario for CAD and markets in general is the uncertainty around China and Evergrande. China's opaque system is ripe for rumors and we've entered a period where markets are especially prone to speculation/volatility. That's a dangerous mix that will keep volatility elevated.Looking ahead, the strong finish in US equities has stabilized global markets with Hong Kong trading only slightly lower and yields edging up. Some of that is undoubtedly predicated on a more-cautious Fed and the potential for an LPR cut from the PBOC.
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