Currency markets await the US Federal Reserve measures to combat growing inflation

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

US Dollar         1.2050-1.2150

Euro                 1.4700-1.4800

Sterling            1.7100-1.7200

The US Dollar Index is marginally stronger this morning as the markets await the release of the US Produce Price Index for April which will provide further evidence of what is going on with inflation in the US. Markets remain almost singularly focused at the moment on inflation and which central bank is going to exit their stimulus program first to combat rising inflation. It is beginning to look like the US Dollar which has been trading weaker for the past few years will be set for a big turnaround once central banks start to change their policies but for now it will bounce around while markets wait for that to happen.

The Canadian Dollar lost some ground overnight and now USD.CAD trades just above the 1.2100 (0.8264) level where it seems to have settled in for the last few days. The Loonie is also holding its own against the other currencies for the moment but if the Loonie does weaken against the US Dollar in the coming weeks then it is most likely it will also weaken against the Euro and Pound.

In addition to the secondary inflation data the market also gets more US data in the form of Personal Spending and Income for April. We may see some initial volatility around this data but after these reports are released the market will settle into holiday mode as Monday is a national holiday in the US.