A leadership contest within the Canadian Liberal Party will select the new prime minister after Justin Trudeau’s resignation yesterday, ING’s FX analyst Chris Turner notes.

Upside risks to USD/CAD remain largely unchanged

“CAD has reacted positively to Trudeau’s departure and is finding a bit more support this morning on reports that Mark Carney is a frontrunner to take the role.”

“Carney would be the most market-friendly candidate, but the domestic political shake-up will be insufficient to drive USD/CAD materially lower by itself. CAD’s weakness remains strictly tied to Trump’s tariff policy, and even if direct duties on Canada are averted, universal 10% tariffs would disproportionately hit the US's largest trading partners like Canada.”

“Expect some more short-term noise on CAD during the Liberal leadership contest, but our considerations about the upside risks to USD/CAD remain largely unchanged.”