Canada Elections 2025: Will Political Shifts Send USD/CAD Soaring or Crashing?
The upcoming Canadian elections could have major implications for the Canadian Dollar (CAD), especially as trade relations and monetary poli
Quick overview
- The upcoming Canadian elections could significantly impact the Canadian Dollar (CAD) due to trade relations and monetary policy uncertainties.
- Political shifts, including the replacement of Justin Trudeau with Mark Carney, have revitalized Liberal prospects, complicating the election outcome.
- A Conservative victory may strengthen the CAD by restoring optimism over trade agreements, while a Liberal win could exacerbate trade tensions and weaken the CAD further.
- Speculation about a potential interest rate cut by the Bank of Canada adds additional pressure on the CAD as inflation continues to soften.
Live USD/CAD Chart
The upcoming Canadian elections could have major implications for the Canadian Dollar (CAD), especially as trade relations and monetary policy hang in the balance.
Political Uncertainty and Trade Tensions Weigh on the CAD
In early 2025, the Canadian Dollar came under pressure, with USD/CAD climbing sharply. By February, the pair surged to a high of 1.4792 — a level not seen since the year 2000. A key driver was U.S. President Trump’s announcement of a 25% tariff on Canadian and Mexican imports, sparking fears of a major trade fallout.
However, when conservative leadership in Canada signaled a potential de-escalation of trade tensions, those tariffs were postponed. Their enforcement now hinges on the outcome of ongoing negotiations between the two nations, as well as the result of the Canadian federal election.
USD/CAD Chart Weekly – The 100 SMA Holding As Support
Following the peak near 1.48, USD/CAD reversed lower, dropping below the critical 1.40 mark. The pair found support at the 100-week SMA (green), forming a doji candlestick that hinted at a possible bullish reversal.
Conservative Win Could Strengthen CAD; Liberal Win Could Weaken It Further
A Conservative Party victory would likely restore optimism over trade agreements, potentially lifting the CAD and causing USD/CAD to retreat. On the other hand, if a left-leaning government were to win, renewed trade friction could pressure the CAD even more, leading USD/CAD to break below key support levels.
At the beginning of the year, polls heavily favored a Conservative landslide, largely due to public discontent over housing, immigration, and cultural policies under the long-standing Liberal leadership of Justin Trudeau.
Leadership Shake-Up Brings Fresh Uncertainty
However, the political landscape shifted dramatically when the Liberal Party replaced Trudeau with Mark Carney — a move that revitalized Liberal prospects. Simultaneously, the left-leaning New Democratic Party (NDP) collapsed in the polls, reshaping the electoral race.
Pierre Poilievre, leader of the Conservative Party, initially struggled to connect with voters on key issues, allowing the Liberals to regain ground. As a result, the election outcome is now far less certain than it appeared just months ago.
BoC Rate Cut Speculation Adds Further Pressure
Adding to CAD’s woes, Canadian inflation continues to soften, and speculation is mounting that the Bank of Canada (BoC) may cut interest rates in the near future. If confirmed, a rate cut would further weaken the Canadian Dollar against its U.S. counterpart.
Conclusion:
With political winds shifting and monetary policy uncertainties growing, the Canadian Dollar is at a critical juncture. A Conservative win could offer some reprieve for the CAD, while a Liberal resurgence might open the door for further USD/CAD gains. Traders should brace for volatility as election day approaches.
USD/CAD Live Chart
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