US Dollar Dips as Markets Eye Fed Rate Decision; Canadian Dollar Awaits Inflation Data

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

US Dollar        1.3550-1.3650

Euro                 1.5100-1.5200

Sterling            1.7900-1.8000

WTI Oil (opening level) $69.05

The US Dollar Index is marginally weaker again this morning as stocks had another strong day yesterday and reached another record high. Markets are now only a day away from the Fed announcement and the 50 vs 25 percent rate cut still dominates the market, Reuters is reporting that markets are still pricing in a 50% chance now of a 50 basis point cut but my own thoughts are I think they will only go a quarter as a full half point cut would push the Dollar lower and stocks much higher and increase volatility in the market which I don't think the Fed would want.

The Canadian Dollar remains range bound near the 1.3600 (0.7353) level as it awaits the Fed release tomorrow. This morning the Loonie is front and center as we get the August inflation report and it is expected that inflation rate will drop to 2.1% from the 2.5% rate in July. If the reading comes in as expected it will allow the Bank of Canada room to introduce another interest rate cut in October which will keep the Loonie under pressure.

In geopolitical news the Liberals lost another by-election but this one had a bit more significance as it was in a long held Montreal riding. I think this result will ramp up the pressure on Trudeau to resign but we will see if his ego will let him.

The Fed gets the last look at the US economy today it the form of August Retail Sales but I doubt it will move the needle as even a small drop won't change their path. Stocks are poised for another positive opening so look for the Dollar to remain under pressure.