07:22 AM EST, 01/13/2025 (MT Newswires) -- Political risks in Canada have been increasing for some time, noted UBS.

So, Prime Minister Justin Trudeau's resignation as

leader of the Liberal Party didn't come as a surprise. While federal elections can only be called after the party's special leadership contest, the developments should ultimately expedite the path to early elections -- perhaps in May, wrote the bank in a note to clients published on Friday.

Increased political stability -- a majority government --

would be positive at a time when negotiations with the

incoming United States administration of Donald Trump are underway, stated UBS. Should there be a change of power, Canada's fiscal situation could tighten under a Conservative administration.

Overall, the bank thinks Canadian politics is merely "noise": U.S. data and the risk of a U.S.-Canadian trade stand-off remain the crucial USDCAD drivers.

The USDCAD has come down from its highs around 1.4460 along with the broader US dollar (USD) reversal. UBS continues to see the pair moving lower in 2025 and expects it to revisit 1.41 by the end of March.

The bank still like selling the upside at current levels and would caution against holding positions over Trump's inauguration date -- next Monday -- as his first policy actions constitute upside risks for the USDCAD.

A resistance level to watch on the top side would be the

1.4660 peak, reached during the COVID-19 crisis, according to UBS.