Canadian Dollar Falls as Alberta Vote Muddies Oil Sector Outlook
TALKING POINTS – CANADIAN DOLLAR, ALBERTA ELECTION
- Canadian Dollar dips against all major counterparts
- Alberta election inciting higher-than-usual volatility
- Political risk may be key factor in coming days for CAD
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The Canadian Dollar fell against all of its major counterparts as markets eyed a provincial election in Alberta, Canada. As the campaign draws its last breath, the Canadian Dollar has become more jittery amid uncertainty over which candidate will triumph. The two rivals are Rachel Notley, current Premier of Alberta and head of the New Democratic Party (NDP) and Jason Kenney from the United Conservative Party (UCP).
The Canadian Dollar is sensitive to political developments in this election because Alberta is the heart of the oil industry in Canada. Therefore, whichever candidate emerges as the victor will have a significant impact on the oil-linked currency. Current Canadian Prime Minister Justin Trudeau and Kenney are politically at odds with each other and the friction between the two could create uncertainty for the energy sector.
The UCP leader’s policies include tax cuts, slashing regulations and restructuring minimum wage laws in an effort to stimulate economic growth. Ordinarily, investors might have been expected to cheer such proposals, attracting capital to the CAD. However, a potential political risk comes from Kenney's threat to turn off the oil taps to British Colombia unless the government in Victoria approved and the construction of the Trans Mountain Pipeline.
Notley is also in support of constructing pipelines and advocates for increased economic diversification – a policy likely aimed at reducing the province’s exposure to violent changes in crude oil prices. This election could be interpreted as a referendum on Notley’s tenure. Frustration over delayed pipeline construction may have fueled the anger of her constituents enough to elect Kenney.
With a record-breaking 700,000 votes in so far, preliminary polls have the UCP candidate in the lead before the election officially ends on April 16. This in large part has to do with politically-polarized nature of this election, which generally stimulates voter turnout because each side is passionately eager to voice their view.
As political developments around this theme unfold, the Canadian Dollar may continue to experience higher-than usual volatility. To learn more about politically-driven market moves, you may follow me on Twitter @ZabelinDimitri.
CANADIAN DOLLAR CROSSES - 3-MINUTE CHART
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--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com
To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.