Macquarie Sees Political Turmoil in Canada as an Opportunity to Go Long on CAD

Macquarie emphasized the ongoing political turmoil in Canada as a potential opportunity for investors, particularly in the currency markets. Following the resignation of Chrystia Freeland and other cabinet members, Prime Minister Justin Trudeau faces increased pressure to resign, with calls for his departure even coming from within his own Liberal Party.

Members of Trudeau's party are expressing concerns about a lack of unity and are demanding a leadership change. Amidst these developments, there are reports suggesting that Trudeau is seriously considering the possibility of stepping down and may announce his decision during a planned address to Parliament on Monday before heading into a vacation on Tuesday.

This political turmoil has caught the attention of traders who might be considering taking strategic long positions in the USD/CAD pair. However, Macquarie advises caution, noting that the potential rise of a Conservative-led government could alter the investment landscape. According to the firm, a Conservative government in Canada would likely be growth-friendly and could align its policies with those of the Trump administration in the U.S., potentially shielding Canada from U.S. import tariffs.

Macquarie predicts that the establishment of a Conservative-led government could lead to the peak in the USD/CAD pair occurring earlier than previously anticipated. This scenario is based on the expectation that a growth-oriented Conservative government would strengthen the Canadian dollar against the U.S. dollar, thereby influencing the dynamics of the currency market.