USD/CAD rises to near 1.3900 due to easing US-China tensions, lower Oil prices

• USD/CAD edges higher as easing tensions between the US and China support the US Dollar.

• China’s decision to exempt certain US imports from its 125% tariffs has sparked hopes for improved trade relations.

• The commodity-linked CAD remains under pressure as declining crude Oil prices further dampen sentiment.

USD/CAD is advancing for the second consecutive session, hovering around 1.3880 during Asian trading hours on Monday. The pair continues to strengthen as the US Dollar (USD) gains momentum, supported by signs of easing tensions between the US and China..

On Friday, sources reported that China exempted certain US imports from its 125% tariffs, fueling optimism that the long-standing trade dispute between the world’s two largest economies could be nearing resolution. However, Reuters cited a Chinese embassy spokesperson who firmly denied any ongoing negotiations, stating, "China and the US are not having any consultation or negotiation on tariffs," and urged Washington to "stop creating confusion."

The US Dollar Index (DXY), which tracks the USD against a basket of six major currencies, is also posting gains for the second straight day, trading near 99.70 at the time of writing. Meanwhile, the Federal Reserve (Fed) remains in a blackout period ahead of the Federal Open Market Committee (FOMC) meeting scheduled for May 7.

Adding to the complex picture, US Agriculture Secretary Brooke Rollins mentioned on Sunday, according to Reuters, that the Trump administration is engaged in daily discussions with China regarding tariffs. Rollins highlighted that not only are talks ongoing, but trade deals with other countries are also reportedly "very close."

On the other hand, the commodity-linked Canadian Dollar (CAD) faces pressure from declining crude Oil prices. West Texas Intermediate (WTI) Oil prices continues to slide as progress in US-Iran nuclear negotiations raises the possibility of Iranian crude re-entering the market. Additionally, expectations that Organization of the Petroleum Exporting Countries and its allies, known as OPEC+ could increase output for a second consecutive month have further weighed on Oil prices.