Canadian Dollar holds range as Trump-Xi summit, firm Oil prices balance USD outlook

USD/CAD trades around 1.3705 on Thursday at the time of redaction, virtually unchanged on the day, as markets price in mixed effects following news from the US-China summit.

Investors are reacting to comments from a White House official reported by Reuters, stating that the meeting between US President Donald Trump and Chinese President Xi Jinping was positive, with both sides discussing stronger economic cooperation. Discussions included broader market access for American businesses in China, increased Chinese investment in the United States (US), and higher Chinese purchases of US agricultural products.

Both leaders also stressed that the Strait of Hormuz must remain open and reaffirmed that Iran must never acquire a nuclear weapon. These statements eased some concerns over disruptions to global energy flows, although supply worries remain in place following recent geopolitical tensions in the Middle East.

West Texas Intermediate (WTI) Oil rises a further 0.51% on Thursday to around $97.45, supported by persistent concerns surrounding global supply. Data from the Energy Information Administration (EIA) showed that Crude Oil flows through the Strait of Hormuz had already declined during the first quarter following the escalation of regional tensions.

This rise in Oil prices could support the Canadian Dollar (CAD), given that Canada remains the largest Crude exporter to the United States. Firmer Oil prices tend to strengthen the Canadian currency, which could limit upside potential in USD/CAD despite a still-supportive backdrop for the US Dollar (USD).

Meanwhile, the US Dollar Index (DXY) remains stable for the day near 98.50. US inflation data continue to support expectations for a restrictive monetary policy stance after April's Producer Price Index (PPI) accelerated more than expected, reducing expectations for interest rate cuts from the Federal Reserve (Fed).