USD/CAD trades higher near 1.3850 due to potential de-escalation of ongoing tariff dispute

• USD/CAD gains as the US Dollar strengthens after Treasury Secretary Scott Bessent hinted at a potential de-escalation in trade tensions.

• The White House also signaled progress in trade talks aimed at easing the broad tariffs introduced earlier this month.

• The CAD found support from rising crude Oil prices, driven by sanctions on Iran and a decline in US stockpiles.

USD/CAD edges higher, rebounding from two consecutive sessions of losses, and is trading near 1.3830 during Asian hours on Wednesday. The US Dollar (USD) found support following remarks by US Treasury Secretary Scott Bessent, who called the ongoing tariff dispute "unsustainable," hinting at potential de-escalation.

On Tuesday, the White House announced progress in trade negotiations aimed at reducing the sweeping tariffs imposed earlier this month. Press Secretary Karoline Leavitt stated that 18 countries have already submitted trade proposals, with President Trump's team set to meet representatives from 34 nations this week to explore possible deals.

However, the USD/CAD pair rally may be limited as the Canadian Dollar (CAD), a commodity-linked currency, gains support from rising crude Oil prices. As the largest Oil exporter to the United States (US), Canada benefits from stronger Oil markets.

Crude prices continued to climb amid new sanctions on Iran, declining US crude inventories, and a more dovish tone from President Trump on the Federal Reserve. Markets also responded positively after Trump softened his stance on Fed Chair Jerome Powell and suggested possible tariff relief for China.

Investors anticipate the Bank of Canada (BoC) will maintain a neutral stance on its monetary policy outlook. The central bank left its benchmark interest rate unchanged at 2.75% last week. Attention now turns to Canada’s February Retail Sales data, scheduled for release on Friday, which could offer further insight into the economic outlook.