Canada Election: Canadian Dollar Pares Losses as Liberals and NDP Head for Narrow Majority

April 29, 2025 - Written by Ben Hughes

STORY LINK Canada Election: Canadian Dollar Pares Losses as Liberals and NDP Head for Narrow Majority

The Canadian dollar lost ground after the projected Canadian election results indicated that Carney’s Liberal Party would fall short of a majority with concerns that a minority government would complicate policy making and make it more difficult to deal with the US-Canada trade crisis.

The currency rallied from lows with the Liberals and NDP parties combined set to secure a majority.

The US Dollar to Canadian dollar (USD/CAD) exchange rate jumped to 1.3870 from 1.3810 before a retreat to 1.3835. The Pound to Canadian dollar (GBP/CAD) exchange rate strengthened to 3-week highs close to 1.8600 before correcting to 1.8540.

City Index senior market analyst Matt Simpson commented; "If there's two things investors don't like, it's uncertainty and minority governments. Investors now have both."

He added; "With legislation likely harder to pass, it could mean trade negotiations are to be less smooth. And not that they were ever likely to be smooth to begin with."

ING expects range trading will dominate; “We retain a broadly flat USD/CAD view for now, as the correlation between the two currencies has re-strengthened and observed volatility has meaningfully lagged those of other USD crosses. We expect most trading into the summer to happen within the 1.37-1.40 range, and we target 1.39 for the end of the second quarter.”

Prime Minister Carney’s Liberal Party will form the next government, but with 98% of districts reporting, the party is projected to win 167 seats, 5 short of an overall majority.


There are also indications that Conservative opposition leader Poilievre will lose his seat while support for the New Democratic Party (NDP) has fallen sharply.

The Liberals and NDP will, however, have a combined narrow majority in parliament.

A minority position would make it more difficult to govern, although the Conservatives have also pledged to back Carney on the issue of trade and dealing with the Trump threat.

The government may have to pledge additional fiscal spending to gain NDP support for policy action and help protect the economy from trade-related damage.

This would have implications for monetary policy.

Goldman Sachs commented; “As a result, more supportive fiscal policy could mean less accommodation from the BoC, and thus a slightly stronger currency on net.”

Goldman has lowered its 12-month USD/CAD forecast to 1.34 from 1.38 previously.


Saxo Chief Investment Strategist Charu Chanana also expressed some concerns over the outlook; "Canada’s likely Liberal minority outcome adds to uncertainty at a delicate time — with recession risks rising, tougher U.S. trade negotiations looming, and a growing need to diversify trade ties.”

She added; “Political fragmentation could limit the scale of fiscal stimulus for the Canadian economy, and investors may worry that Canada faces tough external negotiations without the domestic growth cushion it needs."

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TAGS: Canadian Dollar Forecasts