07:49 AM EST, 01/07/2025 (MT Newswires) -- A leadership contest within the Canadian Liberal Party will select the new prime minister after Justin Trudeau's resignation on Monday, said ING.

The Canadian dollar (CAD or loonie) has reacted positively to Trudeau's departure and is finding a bit more support Tuesday on reports that Mark Carney is a frontrunner to take the role, wrote the bank in a note.

Carney would be the most market-friendly candidate, but the domestic political shake-up will be insufficient to drive USD/CAD materially lower by itself, stated ING.

CAD's weakness remains strictly tied to United States President-elect Donald Trump's tariff policy, and even if direct duties on Canada are averted, universal 10% tariffs would disproportionately hit the US's largest trading partners like Canada, pointed out the bank.

ING expects some more short-term noise on CAD during the Liberal leadership contest, but the bank's previous considerations about the upside risks to USD/CAD remain largely unchanged.