The USD/CAD currency pair is experiencing a strong performance, continuing its upward trend for the third consecutive session and hovering around the 1.3700 level during Tuesday’s Asian trading hours. This upswing can be attributed to a strengthening US Dollar, buoyed by improving market sentiment as tensions in the ongoing trade conflict between the United States and China appear to soften.
Recent discussions between high-ranking officials, including Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick, have been described positively, leading to heightened expectations for enhanced relations between the two nations. Moreover, further meetings are scheduled for Tuesday, aiming to progress conversations centered on technology transfers and rare earth element shipments, which could signal a more cooperative trade environment.
The US Dollar is also benefiting from speculation that the Federal Reserve may maintain its benchmark interest rate at its upcoming monetary policy meetings, fueled by recent robust jobs data that exceeded expectations. Market participants are now awaiting the release of the US Consumer Price Index (CPI) inflation report set for Wednesday, which will provide additional context for the Fed’s future monetary policy decisions.
However, the Canadian Dollar, which is closely tied to commodity prices, could limit the upside potential of the USD/CAD pair. As the largest crude oil exporter to the United States, the Canadian currency often finds support from rising oil prices. Currently, West Texas Intermediate (WTI) crude is trading above $64.50 per barrel, benefitting from a positive risk sentiment spurred by hopes for a successful trade agreement between the US and China.
This dynamic suggests that while the US Dollar gains traction, the Canadian Dollar could still play a pivotal role in influencing the overall movement of the currency pair in the days ahead.
