The US Dollar (USD) saw support against both the Australian Dollar (AUD) and the Canadian Dollar (CAD) during Asian trading hours on Thursday, as traders focused on the upcoming summit in Beijing between US President Donald Trump and Chinese President Xi Jinping, as well as the release of US April Retail Sales data later in the day [1][2]. The AUD/USD pair weakened to near 0.7250, while USD/CAD remained steady around 1.3700 after six consecutive days of gains [1][2].
A key driver for the USD's strength was hotter-than-expected US inflation data. The US Producer Price Index (PPI) surged 6.0% year-over-year in April, up from 4.3% in March and significantly above market expectations of 4.9% [1][2]. On a monthly basis, PPI inflation rose to 1.4% in April from 0.7% in March, far exceeding the anticipated 0.5% increase [1][2]. This marked the largest increase in four years, underpinning the Greenback [1].
Market participants are closely watching the Trump-Xi summit, which marks the first state visit to China by a US leader in nine years [1]. According to reports, the two leaders are expected to discuss trade and the Iran war, with considerations to reduce tariffs on roughly $30 billion worth of goods, excluding those tied to national security [1][2]. However, geopolitical tensions remain elevated, as the summit takes place amid the ongoing war in Iran and recent US sanctions on entities involved in selling Iranian oil to China [2].
Oil prices and supply concerns also play a role in currency movements. The Canadian Dollar may face headwinds from lower oil prices, as Canada is the largest crude exporter to the US [2]. The US Energy Information Administration reported that crude and fuel flows through the Strait of Hormuz dropped by nearly 6 million barrels per day in the first quarter following the outbreak of the Middle East conflict in late February [2].
Looking ahead, traders are awaiting the US Retail Sales report for April, with market expectations set for a 0.5% month-over-month increase, compared to 1.7% in March [1]. Any signs of continued strong inflation or robust retail sales could further boost the USD and weigh on commodity-linked currencies like the AUD and CAD [1][2].
CONCLUSION
Stronger-than-expected US inflation data has bolstered the US Dollar against both the Australian and Canadian Dollars, while markets remain cautious ahead of the Trump-Xi summit and key US economic data releases. The outcome of the US-China talks and the US Retail Sales report are likely to set the tone for further currency movements, especially for commodity-linked currencies sensitive to global trade and geopolitical developments.