The Canadian dollar was little transitioned against the greenback on Tuesday, holding around an earlier three-month high, as Canada’s energy shares got past the worries that new oil pipeline development would become more difficult after the federal election.
Canada’s energy industry witnessed its worst-case election result unfold on Monday as Canadian Prime Minister Justin Trudeau’s Liberal party failed to secure a majority government, leaving them in need of help from left-leaning parties, like the New Democratic Party (NDP) that are against the new oil pipelines.
But Canada’s energy section made its way back to its previous losses to rise 0.6%, buoyed by greater oil prices. U.S. crude oil futures settled 1.6% higher at $54.16 a barrel.
The energy section has the second-biggest weighting on Toronto’s benchmark stock index at about 16%, while oil is one of Canada’s important exports.
“The market will be watching carefully for signals on how a minority government will handle the resource sector and how energy companies will act against the results,” stated Adam Button, chief currency analyst at ForexLive. “In the short term, there are some risks for the Canadian dollar but the rule of thumb on every election is to buy the dip and that will stand true again.”
The election result could also lead to higher fiscal spending. Trudeau’s election platform planned to nearly double the deficit to C$27.4 billion in the next year, while the NDP wants to invest C$15 billion in climate-change steps and create a national pharmacare program.