USD/CAD is maintained above 1,3700 as commercial tensions decrease in the midst of a small store by holidays

• The USD/CAD quotes around 1,3720 before Monday’s American session.
• The president of the United States Trump goes back from the threat of EU tariffs, extends the deadline until July 9.
• The DXY index falls to a minimum of four weeks before stabilizing due to the decrease in geopolitical risk.

The Canadian dollar (CAD) yields some of the initial profits against the US dollar (USD) in the first American session on Monday, with the USD/CAD pair quoting around 1,3720 at the time of writing, after reaching a daily minimum of 1,3686 earlier in the day, since the continuous sale faded before the signals of decreased commercial tensions between the United States (USA) European (EU).

On Friday, US President Donald Trump revived commercial tensions by threatening to impose a 50% tariff on EU assets as of June 1, citing stagnant negotiations, which added a feeling of risk aversion. However, on Sunday, Trump retracted from this threat, agreed to extend the deadline until July 9. This change of course occurs after a telephone call between Trump and the president of the European Commission, Ursula von der Leyen.

The Loonie reached a maximum of seven months against the US dollar on Friday after the publication of Canada’s retail sales data. The data revealed a 0.8% increase in retail sales in March, exceeding the market forecast of 0.7%. The data reinforces the resilience of the Canadian consumer spending, despite the broader economic concerns.

The recent data from Canada have painted a mixed but constructive macroeconomic panorama. While the general inflation showed remarkable cooling in April, underlying price pressures remained firm, with preferred underlying inflation measures of the Canada Bank (BOC) increasing at a faster rate.

The stronger underlying inflation data than expected last week, along with a strong consumer demand, can lead to Co -acting on their rate of rate reduction at their next meeting in June. Following these mixed signals, currency swap markets continue to assess a 32% probability of a 25 basic points by the BOC at its June meeting, according to Bloomberg. The combination of persistent underlying inflation and a resilient consumer expense has left the divided markets, with some economists now waiting for the Central Bank to maintain the stable rates.

Meanwhile, the US dollar is still under pressure, with the dollar index (DXY) reaching a minimum of four weeks of 98.70 at the beginning of the week on Monday. At the time of writing, the dollar is stabilized above the level of 99.00 with the hope of a decrease in commercial tensions between the US and the EU. Even so, it remains widely weak amid increasing tax concerns and a cautious perspective of the Federal Reserve (Fed).

Looking ahead, with US markets and the United Kingdom closed on Monday by public holidays, negotiation volumes are expected to remain low, which can limit significant price actions. Later in the week, market participants will closely follow the minutes of the FED meeting on Wednesday and the data of the Gross Domestic Product (GDP) of Canada for the first quarter and March, scheduled for publication on Friday.