USD index depreciates as oil prices jump much higher

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

US Dollar         1.2650-1.2750

Euro                 1.5300-1.5400

Sterling            1.7650-1.7750

The US Dollar Index is weaker this morning as the markets are reacting to the price of oil jumping much higher and comments from the US Central Bank yesterday. With the release of the minutes from the Federal Reserve's last meeting it was once again confirmed that they plan to keep interest rates low and pump cash into the system as long as necessary which should help continue to push the stock market higher and put pressure on the US Dollar. Stocks are pointing lower to start the day today so we may see the US Dollar rebound a little to start the morning.

The Canadian Dollar was able to take advantage of the weaker US Dollar yesterday as USD.CAD moved back lower to open this morning at the 1.2670 (0.7893) level, it is still bouncing around familiar ranges but it has moved away from the 1.2800 (0.7813) level for the time being. With some 40% of the world's oil production now off-line because of power outages in the US (due to the cold weather) the oil price jumped to $65 a barrel yesterday and the Loonie was able to extend some strong gains which was reinforced by the January inflation numbers that were higher than expected. I read a couple of articles where it is expected that the Canadian inflation rate may jump as high as 3% by May of this year before pulling back to ranges that will keep the Bank of Canada comfortable. If inflation stays high throughout the year it will put the Bank in a difficult position and they will be forced to make some difficult decisions.