Headline: Canada’s “Big Build” Budget Underwhelms, Leaving the Loonie Exposed
Key Takeaways
Introduction: Markets braced for a sweeping fiscal reset under Prime Minister Mark Carney, with promises of generational investments, a pivot in trade strategy, and an economy-ready-to-build agenda. Instead, the latest budget delivered modest measures and few near-term growth catalysts—raising doubts about Canada’s investment trajectory and the outlook for the Canadian dollar.
Carney signaled a major shift in economic strategy, including ambitions to reduce reliance on the United States and expand non-U.S. exports. Yet the November budget offered limited new stimulus: incremental defense outlays, lower immigration targets, and broad infrastructure rhetoric without clear timelines or shovel-ready projects for 2025–2026. A widely touted “major projects office” has so far amounted to formal approvals for initiatives already underway, with the newest tranche appearing similarly procedural rather than transformative.
Trade policy hasn’t provided clarity either. Despite repeated suggestions that a new U.S. deal was near, no agreement has materialized—keeping uncertainty elevated ahead of the mid-2026 USMCA review. For currency markets, that gap between rhetoric and delivery matters. FX traders had priced in some fiscal impulse and faster execution on infrastructure. Without a tangible pipeline of projects, permitting reforms, or accelerated deployment of the projected deficit, the Canadian dollar’s recent resilience looks fragile. Unless energy prices rebound or consumers surprise on spending, USD/CAD could grind higher, with a retest toward 1.45 not out of the question.
Key Points: – Canada’s budget fell short of “transformational” expectations, offering limited near-term stimulus. – The “major projects office” largely endorsed existing builds, with few genuinely new projects. – Hopes for a swift U.S. trade agreement have faded, ahead of the 2026 USMCA review. – Markets had priced in more fiscal support; the Canadian dollar’s outlook has softened. – Without stronger growth catalysts, USD/CAD could trend higher, potentially revisiting 1.45.
