USD/CAD maintains its stability as market participants anticipate the pivotal Trump-Xi summit. Trump and Xi are considering a reduction in tariffs on $30 billion worth of non-sensitive goods, while excluding items deemed essential for national security. The commodity-linked CAD is likely to experience depreciation as declining oil prices diminish demand for Canada’s principal export. USD/CAD exhibits stability following six consecutive days of appreciation, currently trading near 1.3700 during the Asian session on Thursday. The pair remains unchanged as the US Dollar exhibits minimal movement, reflecting market caution in anticipation of a crucial summit in Beijing between US President Donald Trump and Chinese President Xi Jinping.
Market participants are expected to redirect their attention to the forthcoming US Retail Sales report for April, scheduled for release later today. In the context of the ongoing efforts to stabilize relations between the world’s two largest economies, discussions are reportedly underway regarding a framework aimed at reducing tariffs on approximately $30 billion worth of goods, with the exception of those associated with national security concerns. Nonetheless, geopolitical tensions continue to be a significant influence. The summit is occurring in the context of the ongoing conflict in Iran.
Washington has recently intensified its pressure on Tehran by implementing new sanctions targeting entities engaged in the sale of Iranian oil to China and issuing threats to banks that facilitate these transactions. On Wednesday, the US Bureau of Labor Statistics announced that wholesale inflation reached its peak since late 2022. The Producer Price Index experienced a notable increase, reaching 6.0% year-over-year in April, a rise from 4.3% in March and significantly surpassing the market’s expectation of 4.9%. In the latest monthly report, the Producer Price Index experienced a rise of 1.4%, a figure that is double the prior month’s increase of 0.7% and significantly surpasses the expected rise of 0.5%.
The USD/CAD pair could potentially recover, as the commodity-sensitive Canadian Dollar may weaken in response to declining oil prices, considering Canada’s position as the foremost crude exporter to the United States. Nonetheless, apprehensions regarding oil supply persist in the market, as the US Energy Information Administration reported a decline of nearly 6 million barrels per day in crude and fuel flows through the Strait of Hormuz during the first quarter, subsequent to the onset of the Middle East conflict in late February.