USD/CAD continues to hold 1.3800 on slight optimism in US-China trade war de-escalation

• USD/CAD holds above 1.3800 as the US Dollar steadies on a mild increase in expectations of a de-escalation in the US-China trade war.
• Beijing has announced that it will waive additional tariffs on US ethane imports.
• Hopes of tariff relief on some foreign auto imports by Washington have supported the Canadian Dollar.

The USD/CAD pair moves slightly higher to near 1.3855 during North American trading hours on Tuesday. The Loonie pair gains as the US Dollar (USD) ticks higher, with investors turning slightly optimistic on de-escalation in the trade war between the United States (US) and China.

At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, edges up to near 99.10.

During the North American session, Reuters reported that Beijing has decided to waive the 125% tariff on ethane imports from the US imposed earlier this month. This seems to be a positive step towards improving trade relations between the US and China. According to the Energy Information Administration (EIA), China buys nearly half of the US ethane exports.

Market participants believe that both nations would need to reduce the roof-breaking higher tariffs imposed on each other, given their dependency on each other for a significant number of inputs.

Meanwhile, US Treasury Secretary Scott Bessent has also indicated that higher tariffs by both nations are “unsustainable”. However, Bessent wants China to initiate trade talks, which is still keeping hopes on a US-China trade resolution on edge.

On the economic data front, US JOLTS Job Openings data for March missed estimates. US employers posted fresh 7.19 million jobs, lower than expectations of 7.5 million and 7.48 million seen in February.

In the Canadian region, hopes of easing tariffs on a few auto imports by the US have offered some relief to the Canadian Dollar (CAD). Bloomberg reported on Monday that President Donald Trump could announce tariff relief on some auto parts, which are used in manufacturing cars in the US. Given that Canada is one of the leading auto exporters to the US, the headline supported the Loonie.

Going forward, investors will focus on the monthly Gross Domestic Product (GDP) for February, which will be released on Wednesday. The Canadian economy is expected to have remained flat, against 0.4% growth seen in January.