The Canadian federal budget will be released at the top of the hour. It will be the first from finance minister Chrystia Freeland.
Yesterday, it leaked that the country will ban foreign ownership of housing for two years. What doesn't tend to leak are taxation changes and Trudeau could surprise with something on capital gains; there are also rumblings about a windfall tax on banks and insurance companies.
In terms of the overall fiscal picture, the December update projected a deficit of $58.4B in this fiscal year. Expect spending to rise but that could be balanced by higher commodity revenues and revenues from a strong economy emerging from covid.
The main thing to watch for would be some kind of surprise rise in corporate taxes, capital gains or something that would chase capital out of Canada. I suspect some risk of that is priced into the Canadian dollar here at 1.2575.
If we don't get any surprises and spending is high, I think the Canadian dollar will benefit because stimulative spending will give the Bank of Canada more leeway to hike aggressively, starting with 50 basis points next Wednesday.