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- USD/CAD remains steady as traders await the high-stakes Trump-Xi summit.
- Trump and Xi may lower tariffs on $30 billion of non-sensitive goods, excluding items vital to national security.
- The commodity-linked CAD may weaken as falling oil prices reduce demand for Canada’s primary export.
USD/CAD remains calm after six days of gains, trading around 1.3700 during the Asian hours on Thursday. The pair stays silent as the US Dollar (USD) moves little as market caution prevails ahead of a pivotal summit in Beijing between US President Donald Trump and Chinese President Xi Jinping. Traders will also shift their focus to the US Retail Sales report for April due later in the day.
As the world’s two largest economies attempt to stabilize their relationship, they are reportedly considering a framework to reduce tariffs on roughly $30 billion worth of goods, excluding those tied to national security. However, geopolitical tensions remain a major factor. The summit is taking place against the backdrop of the war in Iran. Washington has recently increased pressure on Tehran by imposing new sanctions on entities involved in selling Iranian oil to China and threatening banks that facilitate those transactions.
On Wednesday, the US Bureau of Labor Statistics (BLS) reported that wholesale inflation hit its highest level since late 2022. The Producer Price Index (PPI) surged to 6.0% year-over-year (YoY) in April, up from 4.3% in March and well above the 4.9% expected by the market. On a monthly basis, PPI rose 1.4%, doubling the previous month’s 0.7% and far exceeding the anticipated 0.5% increase.
The USD/CAD pair may regain its ground as the commodity-linked Canadian Dollar (CAD) may lose ground amid lower oil prices, given Canada’s status as the largest crude exporter to the United States (US).
However, Oil supply concerns also loom over the market as the US Energy Information Administration (EIA) stated that crude and fuel flows through the Strait of Hormuz dropped by nearly 6 million barrels per day in the first quarter following the outbreak of the Middle East conflict in late February.
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