USD index is holding to its recent gains

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

US Dollar         1.2150-1.2250

Euro                 1.4700-1.4800

Sterling            1.7150-1.7250

The US Dollar index is holding steady as the market continues to focus on the US Federal Reserve meeting later this afternoon. It is widely expected that the Fed will not make any changes to its interest rate or bond buying program but investors will be closely watching to see if there are any indications that the Fed will start to taper their stimulus program and increase interest rates earlier than expected to combat renewed inflation. If they do hint at any changes to their current policy then look for the US Dollar to soar amid high volatility.

The Canadian Dollar continues to lose ground to the US Dollar ahead of the Fed announcement, USD.CAD opens the day at the 1.2180 (0.8210) level which is again its highest level in weeks. The Loonie could prove to be most vulnerable to a sudden jump in the US Dollar if the Fed hints at a change of policy sooner than later so US Dollar buyers need to watch out for this and get some of their short-term purchases done before the Fed later today.

We have seen another jump in the price of a barrel of oil to $72.41 but at the moment their is no correlation to the Loonie as the market is solely focused on the Fed meeting.

Ahead of the Federal Reserve meeting we do get the Canadian year-over-year inflation report for May and the market is expecting inflation to remain near the April number of 3.5% which we know is well above the Bank of Canada's comfort zone of 2.0%. A stronger than expected number could push the Loonie a little stronger before the Fed meeting.