USD/CAD Holds Steady Near 1.3670 as Traders Await US-China Trade Outcome, US CPI Data

USD/CAD Holds Steady Near 1.3670 as Traders Await US-China Trade Outcome, US CPI Data

Greenback Stable as Markets Weigh Trade Sentiment and Inflation Risk

The USD/CAD pair is holding steady around 1.3670 during the early Asian trading hours on Wednesday, as market participants remain focused on two major catalysts: the outcome of US-China trade talks and the release of May’s US Consumer Price Index (CPI).

US-China Trade Progress Lifts Sentiment for USD

Optimism over a potential trade breakthrough between the United States and China has lent support to the US Dollar (USD). Commerce Secretary Howard Lutnick confirmed late Tuesday that both countries have agreed to a framework under the Geneva Consensus, although final approval from President Donald Trump is still pending.

If a deal materializes, global markets may stabilize further, benefiting the USD across the board, including versus the Canadian Dollar (CAD).

BoC Leaves Rates Unchanged, Signals Possible Future Cuts

Meanwhile, the Bank of Canada (BoC) last week left its benchmark interest rate unchanged at 2.75%, citing trade policy uncertainty, particularly stemming from US-China tensions. However, BoC policymakers hinted at possible rate cuts later this year if economic growth slows.

Analysts now expect up to three additional rate cuts, which could bring the year-end policy rate closer to 2.00%, a scenario that typically weighs on the CAD and provides upward momentum for USD/CAD.

Key Focus: US CPI Inflation Data

Later today, traders will turn their attention to May US CPI data, a crucial indicator for Federal Reserve policy direction. A higher-than-expected print could bolster USD strength and influence short-term rate expectations.

Outlook: Neutral to Bullish Bias for USD/CAD

With diverging monetary policy outlooks between the BoC and the Federal Reserve, and a more stable trade environment, USD/CAD may continue to find support near current levels. A confirmed US-China agreement or hot US inflation data could push the pair higher in the short term.

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