The Canadian dollar rose sharply, hitting a nearly one-month high, after voters in Alberta rejected secession from Canada. About 76% of Albertans voted to remain in the country, easing political uncertainty and boosting the loonie by as much as 0.55% against the US dollar. The result is a win for Prime Minister Mark Carney, who faced a campaign that divided the nation’s energy heartland. Voters also rejected a ballot option for a binding independence referendum by 2027.
Noah Buffam, strategist at CIBC Capital Markets, noted that while Alberta’s separation was a low-probability event, its potential impact was high. The currency’s strength reflects reduced tail risk of Canada losing its highest per capita GDP province. The loonie also gained support from growing expectations that the Bank of Canada will raise interest rates at its Oct. 28 meeting. Overnight swaps now price in an 80% chance of a hike, up from 30% a week earlier.
This shift follows Statistics Canada’s report that inflation rose to 3.1% in September, with business and consumer surveys showing rising long-term inflation expectations. Governor Tiff Macklem stated that higher oil prices are supporting economic growth and that the bank may revise its inflation forecast upward. The central bank has warned it may need to raise rates if energy prices stay elevated and inflation spreads beyond gasoline.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing