By Michael O’Neill

Canada Budget 2025 is titled Canada Strong and then proceeds to list all the reasons why it isn’t. The document concedes that the surge in global and reciprocal tariffs is straining Canada’s trade-dependent economy, while persistent cost-of-living pressures continue to squeeze households and small businesses. Employment growth has stalled, with layoffs concentrated in manufacturing and other export-sensitive sectors, and business confidence remains subdued as firms delay investment amid global uncertainty. Slower worldwide growth, weak productivity, and volatile oil prices complete a picture of muted momentum and fragile resilience.

But they have a plan.

“It’s gonna take-money. A whole lotta’ spending money. It’s going to take plenty of money.” At least that’s what George Harrison would have sung if he were alive. And the Liberals agree, to the tune of an additional $167.3 billion in total budget deficits over the next five years compared to what they predicted in the 2024 Fall Economic Statement.

The government says that in turn for boosting the 2025–2026 deficit to $78 billion, they will spend $7 billion to support Canadians, $12 billion to protect our sovereignty, and plan to spend $115.2 billion over five years for infrastructure investment. The centerpiece strategy is a new Build Canada Homes initiative which will cost $13 billion over five years. It sounds an awful lot like previously announced plans (Investing in Canada Infrastructure Program, Green and Inclusive Community Buildings, and the Canada Community-Building Fund), each of which promised to “accelerate” or “streamline” project delivery.

This budget is different. The government introduced a dual framework: operating budget and capital (infrastructure) budget. The operating budget covers day-to-day expenses, while the capital budget covers long-term investments.

Fun with Figures

The Liberals adopted a version of Elon Musk’s DOGE (Department of Government Efficiency) and promised to reduce government spending to the tune of $13 billion per year for the next five years. That goal is to be accomplished by reducing the size of the federal workforce through attrition, departmental consolidation, and digital modernization. The odds of success are slim. Canada added 232,000 public sector employees between September 2023 and September 2025. Who can forget the government’s digital modernization program for the federal payroll? It launched in 2016 and was expected to cost $70 million. It was an unmitigated disaster and cost the government close to $3.0 billion. The COVID-era ArriveCan app earned the name “ArriveScam.” Enough said.

Don’t Blame the Budget

USD/CAD extended its advance from 1.4054 to 1.4141 this week, marking its highest level since early April. The move reflected a classic combination of global risk aversion, U.S. dollar strength, and a weak domestic economy.

Global tech stocks have enjoyed a profitable ride on AI optimism fueled by global spending across software, semiconductors, and hardware, which is projected to reach US $1.5 trillion in 2025—a 50 percent jump from 2024. That sentiment briefly turned Nvidia (NVDA: Nasdaq) into the world’s first $5.0 trillion company. Then came the “correction” warnings. The heads of Morgan Stanley, Goldman Sachs, and JPMorgan opined about the risk of a 10–20 percent market correction. Those comments sent equities tumbling, boosted Treasury yields, and sparked “safe-haven” demand for dollars. But that was Tuesday. Wall Street is clawing back losses on November 5, but the U.S. dollar is hanging on to its gains, and the Canadian dollar is worse for wear.

Loonie Over the Edge

The Loonie outlook is negative. USD/CAD decisively cleared significant resistance congestion in the 1.3960–1.4010 area, which will now revert to support. That is significant, as the last time USD/CAD broke above 1.4000 (December 2024), it stayed above that level for sixteen months, and that was before the Gospel of Tariffs according to Trump.

The next upside targets are 1.4250 and 1.4370, but it won’t be a one-way street. That’s because elevated RSIs and the risk of mean reversion warn of consolidation toward 1.4020 before the next leg higher. A daily close below 1.3940 would neutralize the bullish bias and return the pair to a 1.3760–1.4060 trading range.

Strong Words-CAD Not.

Canada may call itself strong, but the numbers and the currency tell a different story. A ballooning deficit, weak productivity, and political overpromising have left the Loonie on the defensive while investors seek shelter in the U.S. dollar. Until Ottawa swaps slogans for substance and shows genuine fiscal restraint, the Loonie will prove that “Canada Strong” is a fantasy.