USD/CAD steadies above 1.3950 due to trade optimism, expects a rise in US inflation

• USD/CAD remains steady ahead of the closely watched US Consumer Price Index release for April, scheduled for Tuesday.
• Headline CPI is expected to rise to 0.3% MoM, recovering from the previous -0.1%.
• The commodity-linked Canadian Dollar may find some support as crude Oil prices continue to climb.

USD/CAD is aiming for its fifth straight daily gain, hovering near 1.3970 during Tuesday's European session. However, the pair faced some resistance as the US Dollar (USD) softened ahead of the highly anticipated US Consumer Price Index (CPI) report for April, due later in the North American session.

Market expectations suggest a rebound in headline CPI to 0.3% month-over-month from -0.1%, while core CPI is also forecast to increase to 0.3% from 0.1%. Year-over-year readings for both are projected to remain unchanged.

Despite the USD's slight retreat, the USD/CAD pair found support from encouraging developments in US-China trade talks. Over the weekend, both countries reached a preliminary agreement in Switzerland aimed at significantly reducing tariffs--an effort seen as a step toward easing trade tensions. Under the deal, the US will lower tariffs on Chinese goods from 145% to 30%, while China will cut tariffs on US imports from 125% to 10%. This breakthrough has lifted market sentiment and is viewed as a positive sign for global trade stability.

On the other hand, rising Crude Oil prices could lend support to the Canadian Dollar (CAD), potentially limiting further gains in the USD/CAD pair. As Canada is the largest Oil exporter to the US, higher Oil prices generally strengthen the CAD.

West Texas Intermediate (WTI) Oil price is extending its winning streak to a fourth straight session, trading near $61.70 per barrel. The rally follows renewed optimism from the US-China tariff deal, reinforcing hopes for improved global trade dynamics.