A sweeping election victory for Canada's Liberal Party failed to spark a knee-jerk reaction in the local dollar on Tuesday, leaving analysts more fixated on Wednesday's central bank meeting instead.
The center-left Liberals seized a majority of Parliament's 338 seats, ending a nine-year winning streak for the ruling Conservatives. That saw the local dollar, known as the loonie, fall a modest 0.2 percent against the greenback to $1.3046 during the Asian session before reversing declines to hit $1.2983 in early European trading.
Expectations were for a close race between the Liberals and Conservatives, with markets widely pricing in declines for the loonie should the latter fail to secure a fourth term in office. Liberal leader Justin Trudeau's plans to rack up a multi-billion dollar deficit over the next three years to invest in areas such as infrastructure have spooked financial markets afraid of political uncertainty, pushing the loonie down 0.3 percent in the week leading up to Tuesday.
However, the sweeping victory isn't likely to spark further weakness even when New York markets open for trade, according to analysts.
"I don't see the victory as a major catalyst for the CAD and focus should now fall on Wednesday's Canadian central bank meeting for real direction," said Chris Weston, IG's chief market strategist.