Canadian Dollar Remains Subdued on Tuesday on BoC Announcement, US-China Trade Deal

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The Canadian dollar experienced sharp gains to start the week ahead of two major announcements. The Bank of Canada (BoC) is expected to maintain a 1.75% benchmark rate on Wednesday, and Canadian Labor Productivity is expected to fall 0.4%.

Canada’s dollar gained on news that the US and China have come to a truce on their tariff war. Tariff move suspension was agreed upon by China’s President Xi Jinping and United States’ President Donald Trump.

USD/CAD remained flat at 1.3196 in early-morning trade on Tuesday.

China and the US are still in disagreement on key issues on Tuesday, keeping Asian and European markets subdued and many worried that the optimism over a break in tariffs may be short-lived. United States representatives helped to escalate concerns with the accusation that China stole U.S. intellectual property.

Canada’s exports have also been subdued as a result of the ongoing trade war, which makes it less likely that the BoC will continue to raise rates. Canada’s GDP data also shows a contraction of 0.2%, marking the first month since January that the country’s GDP has fallen.

EUR/USD is also concerning forex traders on Tuesday, with the expectation that resistance will be felt near 1.1420. EUR/USD is trading up 0.33% to start the day, reaching 1.1393 mid-day after climbing as high as 1.1420 earlier in the day.

The pair rose on Monday after falling on Friday.

Italy’s political scene will be a major focus for the pairing this week, as Italy prepares to introduce a new budget proposal to the European Union later in the day on Tuesday. Italy has been struggling with economic issues and job creation for years, and a positive budget proposal could push the EUR/USD higher.

Positive producer prices in the eurozone rose 4.9% compared to the same period a year prior and 0.8% on a monthly basis.

A U.S.-China trade deal will remain a catalyst for the remainder of the week. Signals that the deal may not be possible will have a negative impact on markets and have already started to present. A full resolution on the trade conflict will be difficult to reach. This has resulted in the U.S. dollar index, which measures the greenback against a basket of other currencies, falling 0.40% on Tuesday.

Trump’s description of the Chinese deal didn’t match the official White House description, with some suggesting that Trump has exaggerated the reports. Dow futures have fallen on Tuesday over skepticism of the trade deal.

Jacob Maslow is our Editor, and has extensive experience with writing about global financial matters. He also runs a successful SEO consulting business, Mekomi Marketing