Currency markets react to the US Inflation report

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

US Dollar             1.2600-1.2750

Euro                     1.4400-1.4550

Sterling                1.7150-1.7300

The US Dollar index is relatively quiet ahead of the US January inflation report due out this morning. The market is expecting a monthly increase in prices of 0.5% and an overall yearly inflation rate of 7.3% which will be the highest rate of inflation since the early eighties. The market will look at these numbers and if it is higher than the consensus will ramp up expectation of a 0.5% interest rate hike in March by the Fed.

Post Number Reaction

The January US Inflation report came in at an annualized rate of 7.5% which is slightly higher than expectation. As I write the US Dollar is surging and as I mentioned above there will be a growing expectation of a 0.5% interest rate hike in March to start tackling inflation.

EUR/USD fell from a high of 1.1450 to trade at 1.1390 as soon as the news was announced and is trending lower as I write.

USD.CAD was trading at 1.2660 (0.7899) before the announcement and the rate has jumped immediately to trade at 1.2705 (0.7874) and is also trending higher, we will see what happens as the day progresses.