USD index points lower as stock market recovers

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

US Dollar             1.2500-1.2600

Euro                     1.4200-1.4300

Sterling                1.7050-1.7150

The US Dollar index is lower this morning as stocks were able to recover some losses from earlier in the week, the market reacted to Fed Chair Powell's testimony where he did not lay a clear plan to increasing the pace of interest rate hikes this year but he also said that that higher interest rates could be increased at a rate that would not damage the economic recovery.

The market is now singularly focused on the US December inflation report that is expected to show that an annualized rate of 7.0% which would be the largest jump in 40 years. the month over month increase in prices is expected to jump by 0.5% which is an indication that inflation is not moderating as expected and will need significant action by the Fed. All of this should be a positive for the US Dollar.

The Canadian Dollar was able to take advantage of the weaker US Dollar yesterday with USD.CAD dropping to trade at the 1.2540 (0.7975) level this morning. On the comments by Powell the oil price had a significant jump as it went from $78.50 to trade at $81.25 this morning, the oil market clearly thinks that the US economy will get through these upcoming interest rate hikes and maintain a strong recovery which of course is a positive for the Loonie.

Everything today will depend of course on this inflation number, US Dollar buyers may want to take advantage of these lower levels for the Canadian Dollar as a very high inflation number should push USD.CAD much higher. We should see lots of volatility this morning.