USD/CAD trades above 1.3650, with the market focusing on the progress of US-China trade negotiations

USD/CAD remained stable around 1.3670 in early Asian trading on Wednesday. Easing trade tensions between the United States (US) and China are likely to support the US dollar (USD). Investors will be closely watching the outcome of the US-China trade talks. In addition, US Consumer Price Index (CPI) data for May will be in focus later on Wednesday.

US Commerce Secretary Howard Lutnick hinted at a possible solution with China. Lutnick said on Tuesday night that the US and China have reached a framework for implementing the Geneva consensus, but they will go back to see if US President Donald Trump approves it. Positive developments surrounding US-China negotiations are likely to stabilize global markets and boost the US dollar.

The Bank of Canada (BoC) kept its benchmark interest rate at 2.75% last week, citing uncertainty over US trade policy. However, BoC policymakers noted that another rate cut may be needed if the economy weakens in the face of tariffs. Economists expect the BoC to cut interest rates two or three more times this year, with the final rate at the end of the year likely to be around 2%. This in turn is likely to put pressure on the Canadian dollar (CAD) and provide a "boost" to the pair.

Meanwhile, rising crude oil prices could boost the commodity-linked Canadian dollar. Notably, Canada is the largest exporter of oil to the United States, and higher crude oil prices tend to have a positive impact on the value of the Canadian dollar.