Loonie Gains Amid Easing Inflation; US Dollar Struggles Ahead of Fed Speech

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar        1.3550-1.3650

Euro                 1.5075-1.5175

Sterling            1.7650-1.7750

WTI Oil (opening level) $73.15

The US Dollar index is marginally higher this morning but that is only after it continued yesterday to trade with a weak bias and hit a one year low before pulling back some strength this morning. The Dollar is basically range trading as the market awaits the speech later this week from Fed Chair Powell on the state of the economy and possible interest rate cuts starting in September.

The Canadian Dollar was able to make some further small gains yesterday against the Greenback despite an inflation report that showed an improving inflation situation in Canada. In July the annualized inflation report fell to 2.5% down from 2.7% in June, a level last seen in April of 2021. This is a strong report for the economy and should keep the Bank of Canada on the path of another interest rate cut in September and depending on what the Fed does may keep the Loonie relatively weak.

Stocks finally gave back some gains yesterday but are poised once again for a strong opening which will help to keep the US Dollar under pressure. The market gets the release of the minutes from the last Fed meeting but I think they will be overshadowed by Powell's speech on Friday. The Dollar should remain fairly stable ahead of that development.