Trudeau Wins, Brexit Threats Mount

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, CAD traders turn focus to the BoC's business survey (15:30 London time).  GBP dropped by a full cent on reports the govt theratened 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 January 31. US Sep existing home sales are due next, exp -0.7% from +1.3%. All 3 Premium Insights trades currently in the green. A new trade will be released before the London close. Care to guess the analog mystery chart below?

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 4-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 GBP. The latest indications show that Johnson may have a majority by fewer than 5 votes but some MPs want to slow down the process and could balk, at least for now.