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CAD: Majority victory for Liberal Party - MUFG

FXStreet (Delhi) – Lee Hardman, Currency Analyst at MUFG, suggests that the Canadian dollar has displayed little initial reaction overnight to reports that the Liberal Party are set to form an unexpected majority government in Canada.

Key Quotes

“The latest estimate is that the Liberals are on course to win 184 out of 338 seats in the House of Commons leaving the previous Conservative government trailing on 102 seats. The result is being viewed as a vindication of Justin Trudeau’s campaign to reject Stephen Harper’s budget restraint agenda and brings an end to more than nine years in power for the Conservatives. It marks a remarkable turn-around after the Liberals won only 34 seats in the 2011 election.”

“The Liberals will now pursue their platform including higher infrastructure spending and middle class tax cuts which will be financed by budget deficits of about CAD25 billion over three years and higher taxes on workers earnings of more than CAD200k.”

“At the margin the looser fiscal stance will provide more support for economic growth in Canada and the Canadian dollar. It will also ease pressure on the BoC to ease monetary policy further. However, the Canadian economy and dollar are still facing strong headwinds from the collapse in oil prices which if they remain lower for longer will continue to pose downside risks for the Canadian dollar in the year ahead.”

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