USD/CAD trades above 1.3650 as easing US-China tensions offset impact of higher Oil prices
USD/CAD appreciates as the US Dollar remains stronger ahead of CPI inflation data due on Wednesday.
The CAD may receive support from improved Oil prices amid easing US-China tariff tensions.
US CPI is expected to rise by 2.5% year-over-year in May, slightly above the previous 2.3% increase.
USD/CAD retraces its recent losses, trading around 1.3680 during the Asian hours on Wednesday. However, the upside of the USD/CAD pair could be limited as the commodity-linked Canadian Dollar (CAD) possibly receives support from the improved crude Oil prices. Higher Oil prices may provide support for the CAD as Canada is the largest crude exporter to the United States (US).
West Texas Intermediate (WTI) Oil price remains above $64.00 per barrel at the time of writing. Crude Oil prices receive support from positive risk sentiment, driven by a cooling down of tariff tensions between the US and China.
Moreover, traders welcomed the positive developments from the US-China discussion held in London. Reports suggest that Washington is considering easing semiconductor restrictions and looking for accelerated rare-earth shipments. This boosted hope of reduced supply-chain friction, supporting global trade sentiment and improving potential demand for Canada’s commodity-heavy export base, offering support to the CAD.
However, the US Dollar (USD) also receives support from easing US-China tariff tensions, which offsets the impact of the higher crude prices, strengthening the USD/CAD pair. US Commerce Secretary Howard Lutnick suggested on Tuesday that potential resolutions with China have been achieved and both countries have reached a framework to implement the Geneva Consensus.
Meanwhile, China’s Vice Commerce Minister Li Chenggang said that communication with the United States has been rational and candid, and he will report on a framework to Chinese leaders. However, officials from both sides will seek approval from their leaders before implementation, according to Bloomberg.
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