By Andrew Steele - from the Globe and Mail
The prospect of an NDP government remains remote, but the election of an NDP government in Ontario in 1990 seemed impossible a week out as well.
The recent Angus Reid poll, showing the NDP just five points behind the Tories, raises a frightening spectre for anyone with a mortgage.
What would the election of an NDP minority government mean for interest rates?
The markets have made little movement so far, but Doug Porter with BMO Capital Markets thinks “we could see a significant shift next Monday if these polls are remotely accurate.”
Already, there is some speculation that the polls are hurting the dollar. During this morning’s rally of major currencies against the U.S. greenback, the Canadian dollar was notably sluggish.
It’s unlikely the dollar will swan dive immediately if the NDP is elected. There is still a five-cent cushion over parity, and U.S. fiscal policy, oil prices and interest rate speculation tend to be bigger drivers of the loonie’s trajectory than politics in the short term.
But some wobbling is likely over the next week, especially if the markets had already priced in a Conservative majority and tougher fiscal policy in their earlier buying decisions. Another round of polls showing continuing NDP strength will only exacerbate that uncertainty.
The real test for the economy would come with an NDP budget. Read more...
