USD index gets stronger as markets react to $1.9 Trillion plan for the economic recovery in the US

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

US Dollar         1.2650-1.2750

Euro                 1.5350-1.5450

Sterling            1.7300-1.7400

The US Dollar Index is marginally higher and stocks look set to give back some of their recent gains this morning as markets digest the unveiling yesterday of President-Elect Biden's $1.9 Trillion plan for economic recovery in the US. Overall, I still think markets will move higher on the news of the stimulus plan but for now investors are going to pause and try and get their head around just how the US Government is going to finance such a program especially with comments from Fed Reserve Chairman Powell yesterday who said he is not considering further monetary policy reductions and does not see the US exiting this low interest rate environment until 2023 at the earliest. This massive spending program will drive inflation higher which in turn will put pressure on interest rates in the US so it will be very interesting to see how this all plays out in the coming months.

The Canadian Dollar has had an up and down 24 hours. Yesterday saw the Loonie reach new highs as USD.CAD traded below the 1.2630 (0.7918) level which is a new multi-year low for the currency pair but with the overnight strength in the US Dollar USD.CAD has moved back to the 1.2700 (0.7874) where it sits as I write. The Canadian Dollar also lost a little ground to the other currencies so the Loonie is also off its best levels of the week against those currencies as well. Overall, it should be more range trading for USD.CAD as there are still no domestic influences at the moment that is going to drive the Loonie in either direction.

We get a slew of US Secondary data this morning including Retail Sales for December, for the most part I think the markets will ignore these numbers and focus on the stimulus plan and how smooth is sails through a democratic controlled Congress. If it passes quickly the US Dollar should remain trading with a weak bias and stocks should continue to move forward.