USD/CAD treads water above 1.3700 as tariff tensions ease following US-China meeting

• USD/CAD receives support from improved risk sentiment amid easing US-China tariff dispute.

• US-China advisors are expected to meet again in London on Tuesday.

• Improved crude Oil prices contribute support for the commodity-linked CAD.

USD/CAD extends its winning streak for the third successive session, trading around 1.3700 during the Asian hours on Tuesday. The pair appreciates as the US Dollar (USD) gains ground as market sentiment improves amid easing tariff war tensions between the United States and China.

Treasury Secretary Scott Bessent mentions discussions held on Monday as a “good meeting,” meanwhile Commerce Secretary Howard Lutnick noted them as “fruitful,” increasing expectations of progress in improving relations between the two countries. Again, on Tuesday, officials from the world’s two largest economies are expected to meet to continue the trade talks with expectations of easing tensions over shipments of technology and rare earth elements, per Bloomberg.

Additionally, the Greenback may gain ground due to increased odds of the Federal Reserve (Fed) keeping its benchmark interest rate unchanged at its next two monetary policy meetings, driven by recent stronger-than-expected US jobs data. Traders now turn their attention to the US Consumer Price Index (CPI) inflation, scheduled to be released on Wednesday, seeking fresh insights into the Federal Reserve's monetary outlook.

However, the upside of the USD/CAD pair could be restrained as the commodity-linked Canadian Dollar (CAD) may receive support from the improved Oil prices. As Canada is the largest crude exporter to the United States (US), higher Oil prices provide support for the CAD.

West Texas Intermediate (WTI) Oil price remains steady above $64.50 per barrel at the time of writing. Crude Oil prices receive support from positive risk sentiment, driven by a potential trade deal between the US and China.