What Trudeau’s exit means for the struggling loonie — and Canada’s economy
Global News
Prime Minister Justin Trudeau's resignation sent the Canadian dollar higher against the American greenback on Monday. Here's why it matters for the loonie.
News of Prime Minister Justin Trudeau’s impending resignation sent the Canadian dollar higher on Monday morning in a move some experts say reflects higher confidence in Canada’s economy with new leadership on the way.
The loonie, which had been struggling for months heading into the new year, briefly surged by roughly one per cent in early trading Monday compared to the U.S. dollar as reports of Trudeau’s exit spread. The Canadian dollar briefly notched back above 70 cents US before receding somewhat to roughly 69.7 cents by 2:30 p.m. Eastern.
The Canadian dollar is coming off a rough end to 2024, when signals of a widening policy rate differential between the Bank of Canada and the U.S. Federal Reserve hurt the loonie compared to its American counterpart.
Trade threats from U.S. president-elect Donald Trump have also hammered the loonie since his re-election in November. On the domestic front, Chrystia Freeland’s resignation from Trudeau’s cabinet on the day she was to table the government’s fall economic statement in late December caused the loonie to stumble as well.
After trading around 74.8 cents US at the start of 2024, the loonie ended the year roughly five cents lower.
Investment adviser Allan Small of iA Private Wealth tells Global News that while there are many factors that can shift the loonie on a given day, in the long run, the Canadian dollar exchange rate compared to the U.S. greenback is “absolutely” a reflection of confidence in Canada’s economy.
Monday’s movements reflect how investors think about Trudeau’s tenure as prime minister and how he has shepherded the economy over the past few years, he argues.
“The loonie actually went higher, which tells me that investors in general and foreign investors believe this is a good move, that our dollar versus the U.S. dollar was depressed or down because of leadership, because of the way the country was being run,” Small explains.
