Insights 
VT 
The USD/CAD exchange rate rose to 1.3728 during Asian trading but dropped back to 1.3689, marking a slight decrease on the day.
Reports indicate that progress toward a US-Canada trade deal could potentially lead to a more sustained decline in the USD/CAD rate and strengthen the Canadian dollar.
Nato Spending Commitment
Canada has committed to meeting its NATO spending target of 2% of GDP, which matches one of the US’s requests. Concurrently, Canada has avoided imposing counter-tariffs on steel and aluminium, and Alberta has lifted a liquor boycott.
The US ambassador to Canada has confirmed that confidential discussions are happening, with reports suggesting that a trade agreement may be reached before the G7 meetings on June 15 in Canada.
What we can see from the original content is a set of interlinked developments suggesting a slightly firmer stance by Canadian policymakers in aligning economically and diplomatically with Washington — all of this feeding into current speculation and movement in the USD/CAD pair. At first glance, the pair’s brief climb during Asian hours before retreating appears technical, likely throbbing on thin liquidity. The retreat towards 1.3689 seems more in line with the broader narrative: progress on trade talks has introduced pressure on the US dollar side of the equation, while easing frictions makes room for modest Canadian dollar strength.
Market Implications
The Canadian government’s decision to meet NATO defence spending targets, which previously stood as a point of friction, is more than goodwill. It ticks a box in Washington’s bilateral checklist. That’s meaningful. Meanwhile, Canada’s strategic avoidance of steel and aluminium counter-measures, and Alberta ending its liquor embargo, though regional, work to further temper tensions. The sequence of these developments isn’t accidental.
Now to the implications. With the ambassador openly confirming discussions, and chatter heating up over a potential agreement before mid-June, the market’s attention has narrowed to the G7 summit deadline. Should these expectations hold or strengthen, we expect the pair to remain under moderate downward pressure, reflecting growing appetite for the Canadian dollar. Exchange rate participants, in turn, may begin pricing in improved bilateral trade conditions, possibly chasing short positions on rallies.
In the very near term, risk lies in the shelf life of these hopes. If, by the second week of June, a deal appears distant or delayed, there’s fuel for a reversal. However, if we continue to see signals of alignment — whether through public remarks, policy shifts, or even scheduled press briefings — then this softness in USD/CAD could persist, if not deepen.
Those involved should focus less on the nominal shifts in exchange rates during off-hours trading, and more on whether underlying policy movements hold water. Not every headline will move the dial, but when official confirmation ties together diplomatic and economic channels, that tends to cross into market-impact territory.
As for trade structuring, fading intraday spikes with very tight stops may represent the lower-risk posture across sessions. Timing, however, will matter — any confirmation of a deal ahead of G7 likely catches the market leaning the wrong way, forcing price to adjust more abruptly. We are watching for that.
